Defaults and Restructurings

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The provision of indemnities, particularly those provided to corporate trustees and agents, is an important feature of an effectively functioning structured finance market.  It enables the parties involved to allocate the risks of unforeseen expenditure to those parties with the ultimate economic interest in the transaction and allows trustees and agents to keep their fees at a reasonable level.

Whilst the need for indemnities is generally accepted, the terms on which they are provided can be an area of robust negotiation.
Continue Reading Indemnities – beware the consequences of “reasonableness”

It’s not been a good month for Class X Noteholders. Following the judgment in the Windermere VII case (see our commentary here) in which Snowden J found against the Class X Noteholder, the Chancellor of the High Court, Etherton J, in Titan Europe 2006-1 P.L.C. and others [2016] EWHC 969 (Ch) similarly rejected the arguments put forward by the Class X Noteholders.
Continue Reading The Class X Factor: It’s a NO from the Chancellor

clocksI bring good news from the Bank of England. Whether you have been up all night trying to close a £1 billion securities transaction for your client, or you are buying a house and there’s a last minute snag, the deadline for settling securities transactions and making high-value cash transfers is due to be extended

If you thought the wrangling over special servicer replacements was over following Richard Snowden QC’s judgment in US Bank v Titan Europe 2007-1 (NHP) plc in April last year, think again.

Ever since Fitch issued their press release confirming that as a matter of policy it would not provide rating agency confirmations (RACs) in relation

DTEK Finance B.V., Re [2015] EWHC 1164 (Ch)

Following upon the November judgment in Re APCOA Parking Holdings GmbH, last week Mrs Justice Rose sanctioned a scheme of arrangement between the Dutch company DTEK Finance B.V. (“DTEK”) and holders of notes issued by DTEK in 2010 (the “Notes”). This is notable in that it

€32,000,000.  A horror indeed for Colliers International UK (plc) (Colliers) as Mr Justice Blair awarded that amount to the issuer of the Titan Europe 2006-3 CMBS (Titan).  The judgment was for the loss suffered by Titan in relation to the negligent valuation by Colliers of a property in Nuremberg originally occupied by the (now bankrupt) German mail order giant Quelle (see judgment of Titan Europe 2006-3 plc v Colliers International UK plc (in liquidation) [2014] EWHC 3106 (Comm) here).

Aside from questions that arose in relation to the valuation of the property itself, the case considered pertinent questions of loss and reliance in relation to securitisation issuers, namely whether:

  • Titan was the right entity to bring the claim; and
  • Titan could be said to have relied on the valuation provided by Colliers.

Continue Reading Quelle horreur!

Previously in Clash of the Titan 2007-1: Zeus has spoken, we took a brief look at the judgment delivered by Richard Snowden QC.  Another interesting aspect of the case which is beginning to generate commentary is that one of the other pre-conditions to the replacement of the Special Servicer is that the successor Special Servicer “has experience in servicing mortgages of commercial property on similar terms to that required under this Agreement and is approved by the Issuer and the Note Trustee (such approval in each case not to be unreasonably withheld)”.

On this point, the court found that the above clause contains two separate and distinct requirements, each of which must be satisfied before the termination of appointment of the Special Servicer can take effect – (i) the experience of the successor Special Servicer and (ii) the approval by the Issuer/Note Trustee.

Snowden QC confirmed that “given the importance of the role of Special Servicer, there is every reason why that parties should have intended that there should be a proper check on the suitability of the Special Servicer for the task; past experience is one, but only one, of the obvious factors that might be relevant in that regard”.  He has, it seems, implied that the Note Trustee and the Issuer should have significant involvement in the effectiveness of that check.

Continue Reading Clash of the Titan 2007-1 (Part III): Controversy Thunders On

Well, maybe not Zeus but Richard Snowden QC no less.  On Valentine’s Day this year, we published our blog entitled “Clash of the Titan 2007-1”. Now that the red roses have wilted, the champagne drunk and the chocolates eaten, let us take a look at what the first instance decision in Titan Europe 2007-1 (NHP) has to say about replacing special servicers in European securitisation deals.

In providing directions to the trustee, Richard Snowden QC considered two important issues: Who is the Controlling Party entitled to serve notice under the Servicing Agreement to require the termination of the appointment of the Special Servicer?  What happens if the Servicing Agreement dictates that RACs are required as a pre-condition to the replacement of the Special Servicer but the condition could not be satisfied due to a rating agency declining to provide RACs as a matter of policy?

The “Controlling Party” is typically the party exposed to the first loss position on the structure i.e. either the B-piece lender or if value breaks in the securitised portion, the most junior class of noteholders, i.e. the “Controlling Class”.

Continue Reading Clash of the Titan 2007-1 (Part II): Zeus has spoken

So it’s been just over a year since Fitch issued their press release confirming that as a matter of policy it would not provide rating agency confirmations (RACs) during the replacement of special servicers on EMEA CMBS transactions and indeed, just over a year since our last blog on the matter, entitled “What the Fitch??!”.

At the end of that blog we observed that it was going to be a fun year for CMBS – and wasn’t it just.
Continue Reading Clash of the Titan 2007-1