Class X; Deferred Consideration; Deco 2011-CSPK; Deco 2014-Bonn; IO Strip; Excess Spread; European CMBS; CMBS 2.0; CMBS Issuance; CREFC;

The emergence of European CMBS 2.0 can be directly traced back to Deutsche Bank’s Deco 2011-CSPK which closed in June 2011.  Since that issuance, there have been several deals brought to the market by not only Deutsche Bank but also Bank of America Merrill Lynch and Goldman Sachs as well as three deals arranged by Cairn Capital, a non-bank.  Given that CMBS 2.0 as a financing tool for commercial real estate is here to stay and we are fast approaching the fifth year of this new era, now would seem to be an opportune time to take stock of the CMBS 2.0 product and consider some of the defining structures of these new deals.  Over the course of a series of blogs, we will therefore consider some of the features that can be considered unique to CMBS 2.0.

Class X – a Class Act!

No matter what the vintage of deal, an essential component of structuring a CMBS transaction is to ensure that the “excess spread” (i.e. the positive difference between amounts received on the underlying loans and the liabilities of the issuer) can flow to the originator or its nominee.  Although skimming the margin of the underlying loans is one means by which the excess spread can be obtained, the more prolific mechanism and arguably the most controversial feature of CMBS 1.0 has been the utilisation of Class X notes.

Continue Reading CMBS 2.0 IN FOCUS: Class X – a Class Act!