Fitch: Fort McMurray Wildfire May Hurt Some Canadian CMBS

NEW YORK & CHICAGO--(BUSINESS WIRE)-- The wildfire in Fort McMurray, Alberta has further challenged the already stressed market for six Canadian CMBS transactions, Fitch Ratings says. All of the city's residents were evacuated last week and the fire is still burning.

Fitch rates six Canadian CMBS transactions with exposure to properties located in Fort McMurray: CMLS 2014-1, IMSCI 2012-2, IMSC 2013-3, IMSCI 2013-4, IMSCI 2014-5 and REAL-T 2014-1. Of the nine loans in the area (totalling CAD97.2 million), six are on multifamily properties, two on hotels and one is on an industrial property. Some of the properties were already under financial pressure before the wildfires, due to the economic turmoil in the oil and gas sector. All six of the multifamily properties were in special servicing before the fire began.

The wildfire could add long-term uncertainty to the performance of those properties as it is too early to assess how many residents will return. Fort McMurray's population leapt by 28.7% between 2006 and 2011, according to Statistics Canada. Many of those people were likely attracted to the city by jobs related to the oil and gas industry, which remains the largest employer in the city despite the slide in oil prices last year. This risk could be mitigated if properties that are not damaged benefit from housing displaced residents.

Gauging the damage to those properties and the impact on the transactions is, at this point, difficult. Fitch expects the properties that may be affected by the fire would be able to recoup some of their potential losses through their insurance coverage. We have requested updates from the loan servicers regarding coverage including any business interruption insurance. They may also be entitled to some disaster relief funding.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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Source: Fitch Ratings

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