After some delay and much anticipation, funds from the Public-Private Investment Program have started to trickle into the capital markets. One of the main goals of the program was to spur liquidity in the securitized debt market. The hope was that increased liquidity and activity in this market would hasten the return of asset securitization as a prominent funding vehicle. As is widely known, the extension of credit through the securitization markets has completely dried up in commercial real estate. So what are the early indications for success for this program? Well, it is clearly to early to gauge the success in terms of the CMBS market, but early signs suggest that PPIP managers are confining their purchase activity to the very highest levels of the capital structure. This does not bode well for the levels right below, i.e., the AM and AJ tranches, which in turn will likely translate into the inability of some of the more aggressively underwritten loans from 2005-2008 to refinance. As a result, distressed loan opportunities in desperate need of capital infusions may become plentiful.
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