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
€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:
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
Another day, another CMBS transaction declares an insolvency related event of default (after the REC6 default), this time based on the ‘balance sheet’ event of default. The notice posted by the issuer clearly states that after the sale of property securing the Brisk loan, the issuer will not have sufficient assets to repay the Class D Notes and the Class E Notes. Its assets are less than its liabilities. Hence, an insolvency event of default must occur. Simple, right? Well, maybe…
Continue Reading Victoria Funding (EMC-III) PLC: (I can’t get no) Satisfaction
Last week’s new Debussy DTC/Toys’R’Us CMBS transaction , which we were happily involved in, has sparked media attention as a sign of recovery of investors’ faith in the European securitisation markets. It also demonstrated investor demands to address some of the structural issues that had arisen in the original Vanwall securitisation as well as other legacy CMBS transactions.
This new CMBS incorporates many of the features based on a set of guidelines drawn up by banks and funds to govern new European CMBS transactions (although it should be noted these are separate from the guidelines drafted by Commercial Real Estate Finance Council’s CMBS 2.0).
Continue Reading Playing with New Toys: How investor guidelines are shaping new CMBS transactions
As one of the newest junior associates to join the growing Structured Finance Group at Reed Smith, there are times when I feel that I have the best seat in the house to witness the changes going on in this tumultuous period for our financial markets. The economy as a whole, and its associated regulatory regime are in a clear and sustained state of flux.
The main benefit of this for someone at my stage of their career is that it encourages you to “challenge the unchallengeable.” Ideas and concepts that were previously accepted practice are now being reformulated and reconsidered. The building blocks which were simply taken as read are now questioned and analysed in detail.
Continue Reading Challenging the Unchallengeable
Those issuers, corporate services providers, collateral managers, servicers and special servicers that regularly submit debt announcements on the Irish Stock Exchange will know how straightforward and quick it is to submit. For those that don’t, at present this process involves simply sending a copy of the notice or announcement to the email address announcements@ise.ie and the publication is free of charge if a Word version of the notice is sent.
Continue Reading Irish Stock Exchange announcements – Its all change at the Exchange!
It’s been a year since I joined the structured finance team. I can’t believe it went by so fast. A year of learning and moving forward. Downgrades, liquidity drawings and agent replacements in the summer, noteholder meetings in autumn, covered bonds and refinancing of old CMBS deals in the new year. Inevitably, this one year mark makes me think how much I’ve changed, and how much I’ve learned in the process. It also makes me think how much the ABS markets and the types of investors in those markets have changed since the emergence of the subprime mortgage crisis and the credit crunch.
Continue Reading From Finance 101 to CMBS 2.0