Toys R Us kickstarts European CMBS market Toys R Us, the privately-owned toy retailer, has issued a £263m financial instrument backed by its suburban big box retail stores, in a sign that Europe's securitisation market is slowly reviving. The bond, which has a seven-year duration and whose proceeds will be used to refinance an earlier bond, comprised £184.2m of senior notes, rated A minus by Standard & Poor's, yielding 5.93 per cent a year. It was arranged by Cairn Capital, a London-based asset manager. Proponents of asset-backed securities hope the issue will be a shot in the arm for the wider commercial mortgage-backed securities market, particularly as the Toys R Us deal involves so-called "secondary" properties located in out of town centres rather than central city real estate. CMBS package together bundles of commercial mortgage revenues for fixed income investors. "The fact that it's "secondary" [properties] is positive and I hope it will stimulate more interest among bond holders," said Bruce Nelson, chief operating officer at Situs, a property advisory company which worked on the deal. It's a good sign for the [European] market...if you compare it with the US we're starting to see a resurgence of the CMBS market here. The issue comes after a troubling period for Europe's ABS markets, which suffered big declines in issuance following the global financial crisis. Mortgage-backed securities - which many blamed for sparking the crisis in the US - were particularly hard hit, with European issuance dropping to almost zero in 2009-10. European CMBS issuance stands at about $5.5bn for the year so far, according to figures from Dealogic, five times the figure achieved over the same period last year and more than double the $2.5bn seen during the whole of 2012. "We're firmly on the road to recovery in the CMBS market - the appetite is there...[investors] are looking for yield and not a lot else matches it," said Conor O'Toole, head of European asset-backed research at Deutsche Bank. There's a lot more [mortgage] loan origination and asset classes that would not have been possible to issue one year ago and are now making inroads. Problems still persist, however, particularly as falling prices for shopping centres and office blocks outside major cities have meant a swath of loans that support CMBS bonds arranged in the boom years of the last decade are failing to repay at maturity. This month S&P said that CMBS defaults had more than doubled in the first half of the year. The rating agency expected more CMBS defaults in the second half of the year as tough economic conditions led to more borrowers defaulting.