Report: Fortress May Do First New CMBS for TALF

NEW YORK (Reuters) – Fortress Investment Group may aggregate $650 million in commercial loans into the first new commercial mortgage-backed security eligible for a federal lending program, Commercial Mortgage Alert reported on Friday.

Bank of America Corp. would arrange the sale that may include $414 million of senior debt and a $236 million mezzanine loan, the trade publication said.

Bank of America and Fortress Investment Group spokesmen had no immediate comment.

The Federal Reserve is considering properties backing the deal for its Term Asset-Backed Securities Loan Facility, or TALF, market sources told the publication. There have been no new CMBS issues under TALF because the Fed is concerned about the risks in transactions backed by loans from a single borrower, the publication said.

Under TALF, investors apply for financing from the Fed and purchase CMBS or other asset-backed securities. The program is aimed at resuscitating lending in commercial real estate, where defaults are rising due partly to a lack of credit.

Proceeds would be used to refinance part of a $1.6 billion loan used to fund Fortress’ $3.7 billion buyout of Florida East Coast Industries, operator of railway and property firm Flagler Development, the publication said. The loan, facing maturity this year, is backed by Flagler’s real estate portfolio.

(Reporting by Al Yoon; Editing by Kenneth Barry)