CDOs, MBSs, CMBS, CMOs

Lender View

Posted on Tuesday, April 14, 2009

Some of the factors invovled in analyzing a CMBS default from the lender view include:

Cause of default, property business aspects, fincial operating statements, management capabilitites, other factors that could be impacting the property.

Rights under loan documents, right to replace management, control cashflow/lockbox, control budgets, approve leases, other collateral such as letters of credit , reserves or guarantees.

Legal remedies; forelcosure, appoitnemnt of recevier, activiatyion of assignment of leases, etc.

Possibility of consensual remedies such as a debt restructuring and forbearance, sale or property, refinance or paydown.

Leverage can be accomplished by way of cash management/lcokbox (hard or soft or springing), assigment of leases, initiating foreclosure to trigger receviership, involuntary bankrputcy, etc but risks include potential lender liability, mortgageee in possession, tenants withholding rent or vacating, etc.

When REMICS are invovled, borrowers may deliberately defaqult to try to circumvent the REMIC restrictions or file banruptcy in hopes that a judge will grant reflief from the REMIC structure.


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