JPMorgan $500 mln Inland Western CMBS draws demand

NEW YORK Dec 9 (Reuters) - JPMorgan Chase & Co. has drawn more orders for the largest commercial mortgage bond since mid-2008 than can be filled at proposed prices, suggesting firm demand for new conservative securities in an otherwise sketchy market, according to an offering document.

The $500 million issue backed by retail properties of the Inland Western Retail Real Estate Trust is oversubscribed in the top two, AAA-rated, portions, according to the document reviewed by Reuters.

Inland Western's top-rated bonds are being marketed at yields that are 1.5 to 2.2 percentage points over an interest-rate benchmark, about a third current levels on existing CMBS made at the height of the real estate boom.

The demand is also notable because it is the first time underwriters have asked investors to purchase CMBS with a 10-year maturity since the market seized up in mid-2008 when the credit crunch and recession took hold. The most recent issue, a seven-year CMBS backed by Fortress Investment Group properties, sold at a 2.25 percentage point premium over a rate benchmark.

Yield premiums on old CMBS have declined amid expected demand from federal programs. But overhanging those issues are rising defaults as the recession cuts revenue needed to service the debt, a dearth of equity relative to the loans and a lack of credit needed to refinance maturing mortgages.

Like the Fortress issue, underwriters bet demand for the Inland Western issue is strong enough to sidestep use of a Federal Reserve's emergency program. The first CMBS since mid-2008, a $400 million bond from Developers Diversified Realty Corp., on Nov. 16 sold with marginal help from Fed-funded investors. (Reporting by Al Yoon; Editing by Leslie Adler)