Commercial Real Estate's Moment of Truth

Reuters reports:

Procrastination is not a virtue, except when it involves billions of dollars of debt.

A mantra has taken hold of lenders sitting on loan piles: amend and extend. Or as lawyers involved in negotiations between borrowers and lenders say: delay and pray.

The $6.7 trillion U.S. commercial real estate market has been a standout for such tactics and in part explains why, despite the rapid deterioration in property prices and cash flow, delinquencies and defaults so far have been relatively low.

In the smaller but once-powerful leveraged loan market, such tactics have also allowed some companies, many of whom tapped this market to finance some of the biggest leveraged buyouts this decade, to avoid default this year. That’s a good thing because rapid-fire defaults could have kept credit markets clogged for longer and the financial system on precarious footing.

You'll want to read this one.