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

Just a few blissful years ago, one would never think of originators getting wound up or sellers being liquidated. In the world of structured finance, the possibilities of that doomsday scenario were remote, unthinkable and above all, no one wanted to discuss its potential occurrence.

That changed with the Lehman collapse and with that, a domino effect ensued.

Of course, that’s not to say that the industry never thought of what would happen in that unlikely occurrence and the transaction documents do provide for some sort of crisis resolution. Despite the existence of clauses to deal with bankrupt originators, these would prove to be tedious and impractical at best and totally unworkable at worst.
Continue Reading Practical implications of insolvent originators