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| Weekly Interest Rate Tracking |
| November 7, 2008 |
Good Afternoon,
Attached is a PDF copy of Colliers Meredith & Grew's interest rate sheet that includes current and historical Treasury, LIBOR and Prime interest rates, which are updated daily with real time data from Strategic Alliance Mortgage.
We provide these updates on a weekly basis to keep our clients and colleagues aware of rate movements. We hope you find this information helpful.
DOWNLOAD INTEREST RATE SHEET (119KB)
The following Market Perspective provides insights and commentary on breaking news and emerging trends in commercial real estate finance.
European Central Banks Slashed Interest Rates on Thursday. (Reuters) - Britain and Europe slashed interest rates on Thursday amid recession fears deepened by some of the worst U.S. retail sales in decades and an IMF forecast for an economic contraction not seen since World War Two. The rate cuts failed to halt the slide of global stock markets amid distressing signs including top automaker Toyota halving its profit forecast and expectations the United States could report another 200,000 job losses on Friday.
The Bank of England (BoE) cut rates by a stunning 1.5 points to 3%, the lowest level in more than half a century, to combat a slumping housing market, a decline in manufacturing and increased unemployment. Investors, who had expected a cut of 50 bps, called the move "astonishing" and "spectacular." The European Central Bank (ECB), covering 15 European nations, met market expectations by reducing its benchmark interest rate 0.5% to 3.25%. ECB President Jean-Claude Trichet did not rule out a further cut though some analysts called the half-point reduction disappointing considering that the Bank of England acted so boldly. The U.S. Federal Reserve's benchmark rate stands at 1.0%.
U.S. Weighs Options to Ease Strain on AIG. (Bloomberg) Federal officials are considering ways to ease the financial pressure on AIG Inc., including changing the terms of the $85bn loan extended to the insurer. Negotiations remain fluid, but one option under examination is to have the government backstop AIG's credit-default-swap contracts. It also may reduce the interest rate or extend the duration of the two-year loan facility, the people familiar with the matter said.
AIG's Woes
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The Problem: AIG is trying to sell assets to pay back a massive $85 billion credit line in a down market.
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Pressure Point: The loan carries a stiff interest rate, including 8.5% for money it doesn't actually borrow and over 10% for what it does borrow.
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Possible Outcomes: AIG could struggle to repay the loan, or cut a new deal with the government that eases the burden.
AIG agreed to the government's terms under duress in mid-September, with the expectation that it would be a short-term bridge until AIG could sell assets to meet its obligations. But it came just hours after Lehman Brothers Holdings Inc. filed for bankruptcy protection, which helped throw world markets into turmoil and complicated the AIG plan. AIG's role in the credit-default-swap market remains a sensitive issue for the government. AIG counterparties have demanded billions of dollars in collateral to ensure AIG stands behind its commitments to make payments in the event of defaults. If it were unable to meet those obligations, it would prove to be a systemic risk to the global economy, said people involved in the matter. This has become a concern for foreign governments, who are pressuring U.S. officials to find a solution.
A government backstop would lift the pressure off AIG to keep posting tens of billions of dollars in collateral. Some cash may flow back into government coffers if collateral AIG already has posted is returned. Such a guarantee could, however, make the government liable for large future payouts and push the government into the position as a direct participant in markets it also oversees. AIG, under Chief Executive Edward Liddy, said it will pay back the loan by selling off most businesses outside its core property and casualty lines. But the economic environment and threats to AIG's long-term prospects have made it harder for the 89-year-old firm to find buyers with such large sums of cash.
Colliers Meredith & Grew Perspective: Capital will remain tight into the fourth quarter as lenders look to shore up balance sheets, shed toxic assets, and reevaluate internal appetite for exposure to commercial real estate vs. alternative investments such as discounted note purchases and CMBS paper.
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| Please contact the Capital Markets Group at Colliers Meredith & Grew with any financing questions.
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Colliers Meredith & Grew is a Boston-based commercial real estate company with integrated service groups including Brokerage, Capital Markets, Counseling & Valuation, Development & Advisory, Investment Sales, and Property & Asset Management. In addition to representing its core clients in New England, Colliers Meredith & Grew provides national and international real estate services to its multi-market clients as a member of Colliers International and as an owner/member of Strategic Alliance Mortgage LLC (SAM). Colliers International is a worldwide affiliation of independently owned and operated companies in more than 290 offices in 61 countries. |
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