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Distressed debt: Cheyne raises eyebrows with servicer switch

Leading hedge fund transfers £88 million to start-up Solutus as questions grow about influence of junior noteholders in distressed CMBS

When start-up special servicer Solutus Advisors was recently awarded the mandate to manage seven CMBS loans worth a total of £88 million in a matter of weeks, more than a few eyebrows were raised across the market. Special servicing is a very technical business with traditionally high barriers to entry.

So why was a brand-new firm with no track record, established in late 2010 by James Bannister and Darren Davey, ex-heads of Deutsche Bank's servicing and asset management group, suddenly replacing long-established firms such as Hatfield Philips and Capita on the management of distressed CMBS structures?

One thing that all the loans that have been transferred to Solutus have in common is that the junior noteholder and operating advisor in the related CMBS is Cheyne Capital.

Special servicers have an unenviable task in the distressed CMBS market: keeping everybody happy. "In the absence of a liquidity event the special servicer is in control. Without a clear mandate for unilateral action creative solutions are key to achieving a restructuring," observes Nigel Das, director at Rothschild.

In any CMBS deal the bonds have a legal final maturity and the loan has a legal final maturity and the two will be different.

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