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CMBS: We can’t work it out

Senior and junior noteholders are at war, navigating a complex legal web to extract some value from Europe’s unravelling CMBS market. Louise Bowman explains the limited options available to the servicers stuck in the middle.

CMBS: The value of loan-to-valueCase study: Plantation Place

Case study: Four Seasons

THEY WERE THE ones that no one really cared about in the good years: just lowly administrators whose most pressing responsibility was little more than to make sure that cashflows were paid in a timely fashion. How times have changed. Servicers and special servicers to structured commercial real estate deals now find themselves in the eye of a storm, with the authority to make or break the fortunes of lenders that previously barely noticed them. But what those lenders are also belatedly noticing is the fiendishly difficult position that servicers are in as they try to fulfil their remit. "We believe some noteholders are now realizing that their interests conflict with the interests of other creditors in material ways in some cases," says Judith O’Driscoll, director at Standard & Poor’s Structured Finance. "But this is no surprise to servicers and special servicers who are aware of the conflicts of interests that might exist between different classes of lenders." When things are going well there is not a problem as the interests of all investors are usually aligned. However, things in the world of securitized commercial real estate are not going well.