Almost £3B of the European real estate loans parcelled up and sold to bond investors are unlikely to be refinanced because of current conditions in the lending market, according to a report from ratings agency Morningstar DBRS.

Of the €9.6B (£8.2B) of outstanding commercial mortgage-backed securitisation debt in Europe right now, €4.4B is secured against office and retail property, Morningstar said in the report.

Of that office and retail debt, €3.2B does not currently meet the requirements of the lending market. Values and income from the properties against which these loans are secured have dropped, indicating the loan-to-value and income cover ratios of the loans are higher than new lenders would accept at a refinancing.

That means that the loans will likely need to be restructured when they reach maturity.

The good news for lenders is that conservative LTV ratios in the wake of the financial crisis mean they are unlikely to face losses. The average LTV across European CMBS at the time loans were made was 65%.

The fact that most CMBS loans were made to good quality borrowers and did not include hedging contracts that expire after loan maturities is also a plus, Morningstar said.

That aside, Morningstar did identify two transactions where it expected the most junior bondholders to take a loss. One involves bonds secured against an Italian shopping centre portfolio owned by a local fund, and the other involves bonds secured against a portfolio of UK shopping centres previously owned by Oaktree.

While lenders might not take a loss, borrowers might need to put more equity into deals to facilitate refinancing, or sell at levels below what they paid, according to the report.