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When it comes to the nuts and bolts of commercial mortgage-backed securities (CMBS), one of the key features that will be at the very forefront of any Arranger’s mind will be the mechanism by which ‘excess spread’ (i.e., the positive difference between amounts received on the underlying loans and the liabilities of the issuer – or, in other words, profits) is not only extracted from structures in an efficient manner, but also in such a way as to maximise returns. Although this is a standard feature for CMBS, a review of recent transactions reveals a high degree of variance in extraction structures across deals.
Continue Reading CMBS 2.0 – Class X – variety is not always the spice of life