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
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
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
Account banks, swap counterparties and liquidity facility providers getting downgraded is now the new norm. Not being able to locate replacements with the requisite ratings and/or the appetite to take on these roles on substantially similar terms is also passé. In reality, it is frequently the case that nothing changes. These entities are still performing their obligations and from an operational standpoint, the deal functions as it should. But the problem arises because of the by now oft used phrase “in breach”. The transaction documents oblige either the servicer or the issuer to search for replacements who hold the requisite ratings. Every day that an entity that is “in breach” of the rating triggers remains on the deal is a day where the issuer and/or the servicer is “in breach” of its obligations. This is despite the fact, that the deal may still be performing as it should!
Continue Reading Noteholder Meetings – If you snooze, you should lose
As some of you may have seen, Fitch helpfully issued a press release last week clarifying its position on providing rating agency confirmations (RACs) during the replacement of special servicers on EMEA CMBS transactions. Rather unhelpfully, however, the release stated they would not be providing any such RACs in the future. This policy, of course, applies to the very transactions that Fitch rated (in the majority of cases) at inception which contained (presumably, either at Fitch’s request or at the very least with their knowledge) the requirement that such RACs be obtained from the relevant rating agencies before any transfer of the special servicer function could occur.
The right to replace the special servicer of a particular loan in a CMBS transaction typically lies with party that is exposed to the first loss position in relation to that loan i.e. either the B-piece lender or the lowest ranked class of noteholders (usually labelled the ‘controlling party’ or ‘controlling class’). Such controlling party or controlling class therefore has a strong economic incentive to ensure that the maximum recovery from the loan is achieved by the special servicer.
Continue Reading What the Fitch??!