Bond investors with mall exposure face a wave of downgrades as Black Friday is about to kick off

It may be a “Bah! Humbug!” moment for a number of property bond investors bullish on shopping malls heading into the holidays.

A series of credit downgrades have hit bonds tied to a several struggling regional malls, even before shoppers line up for Black Friday sales next week.

Fitch Ratings cut its ratings on four junior classes of bonds tied to debt on the Holyoke Mall near Springfield, Mass., and the Sangertown Square in New Hartford, N.Y., last week and dialed down two more lower-rung classes with exposure to the Fox River Mall in Appleton, Wis., and the Eastgate Mall in Cincinnati.

The credit rating agency on Monday lowered its ratings on another eight junior classes with heavy regional mall exposure.

The decline of U.S. regional malls is nothing new, but analysts at Fitch see the potential for additional downgrades and “substantial losses” on weaker malls financed a decade ago, particularly in the face of slumping sales, high vacancies and a mound of maturing debt that may face refinancing trouble as lenders have grown more skittish about retail properties.

“We’ve been concerned with malls for the last few years,” said Mary MacNeill, who heads up U.S. CMBS surveillance for Fitch Ratings, in an interview. While 2010 and 2011 loans have benefitted from 10-year terms and low rates, MacNeill said there are no guarantees that malls grappling with shrinking sales and major department stores departures will obtain new financing, or even if some owners will want to stick by their properties.

“A savvy operator is going to pick and chose the malls they want to keep,” she said. “Many malls are owned by big operators, but if they needed to, they could hand the keys back to the lender.”

This chart shows the spike in retail loans coming due through the

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