Global Corporate Trust:
Lead Panelists at the
Commercial Real Estate
Finance Council Conference |
| U.S. Bank Global Corporate Trust Services played a significant role in this year’s annual Commercial Real Estate Finance Council (CREFC) European conference, held in Canary Wharf on 13th -14th November. Attendees heard from U.S. Bank experts on two panels - Chief Counsel- Edmond Leedham, on “CMBS 2.0 Developments”, and Laurence Griffiths, Head of Structured Finance Relationship Management on “Note Maturities Uncovered”. |
| During the event, it was noted that the volume of CMBS loans and notes maturing in 2014 will be less than previously expected due to the large number of extensions, work-outs or refinancing, “That said, we have started to see the first few note-level event of defaults in the past few years, some insolvency defaults at the end of a transaction, and more recently payment defaults caused by underlying asset performance”, said Griffiths. |
| “It’s important that lessons learned from these transactions are incorporated into new ones as the revival in the CMBS market starts to gather pace. Indeed, a number of interesting changes were notably included in the recent Debussy DTC PLC transaction, where U.S. Bank was appointed to provide a variety of services including Note Trustee”, continued Griffiths. |
| From a documentation perspective, the
conference highlighted the merits of CMBS 2.0 but several panelists
opined that these guidelines and principles should not be regarded
as the sole panacea towards meeting investor concerns and that it is the
structures themselves that need to be simplified in order to appeal to
the wider investment community. |
| Edmond Leedham who spoke on the CMBS 2.0panel agreed
with the notion that "Junior investors and replacement
servicers should not expect trustees to be substantially involved in the
process of putting new servicers in place" and explained that trustees
have been pulled into |
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| recent controversies in respect of such processes
due to the inclusion of very prescriptive conditions precedent in legacy
transactions that are not easily met in the current environment. Edmond
further explained the contractual and fiduciary constraints that
trustees face in attempting to assist transaction parties in resolving
such controversies and expressed support for CMBS 2.0 principles that
simplify required conditions precedent and the accession process
generally and reduce the potential of trustees being asked to intervene
in attempts by junior holders to exercise rights that are meant to be
reserved to them. |
| The panel also discussed recent levels of market activity and offered diverse views on whether such activity suggests a significant upward trend in issuance volume. The panel generally agreed there is continued confidence in CMBS as an asset class, but concerns were expressed about the supply of suitable assets and the difficulty that banks face in respect of the cost of capital involved in originating and holding the loans for packaging into CMBS. When asked to give his predictions on where the market is going for 2014, Edmond commented that he believes we are on a solid upward trend and expects issuance volume in the range of EUR 10-15 bn (which was the range most chosen by the audience in response to a real time poll taken during the panel discussion). |
| U.S. Bank Global Corporate Trust Services continues to serve the commercial real estate market and is a full provider of trustee and agency services on CMBS transactions. |
| Interested in learning more about U.S. Bank Global Corporate Trust Services? Visit us online at usbank.com/coporatetrust. |
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