Read the small print. This has always been good advice, but it is something that investors in subordinated CMBS should particularly bear in mind. In the rush to buy into this asset class in recent years many have bought deals that incorporate available funds caps (AFCs): essentially caps on the amount of interest that can be paid to junior noteholders in the event that available funds are insufficient to meet total interest payments on the outstanding notes in a deal. The impact of such a cap can be very different depending on whether deals pay down...
