Case study: Plantation Place
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Case study: Plantation Place

CMBS: We can’t work it out
CMBS: The value of loan-to-value

Case study: Four Seasons

REC Plantation Place, a £527 million ($776.2 million) CMBS deal signed in 2006, is backed by a central London office building. This deal was the first in Europe to breach its LTV covenant, in August 2008. The issuer is a listed fund and was therefore required to undertake a valuation. The breach occurred despite an equity injection of £4 million by Invista Property Foundation Trust in March 2008. Despite a succession of bondholder meetings the deal’s problems are no closer to resolution. Holders of £300 million senior notes want enforcement and junior noteholders do not. One lawyer suggests that the drafting of the documents in the original transaction suggested that the senior lenders might have the right to enforce, which would have been unusual. A strong argument against enforcement is the cost of breaking the interest rate swap, which is so far out of the money that it could start wiping out the senior positions. A proposal to redeem a portion of the loan and to remove the LTV covenant has been unsuccessful. A revaluation of the property in December 2008 gave the deal an LTV of 113.72%

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