A/B Tranching of Commercial Real Estate – Secured Loans: An ...

Approval and Consultation Rights of B Participant
other than in Securitized Loans
• If the B holder does not keep the A tranche current, in some, but not
all cases, the B holder may run the risk of losing certain of its voting
or other rights – but not its approval rights with respect to the
Unanimous Action Items.
• Consequently, the B holder can never be in a position where the A
holder could agree to reduce the principal owed to the B holder,
release the collateral for the B position or take other steps that are
covered by the Unanimous Decisions even if B holder is not curing
defaults on the A tranche or holds a position that is highly impaired.
• In these cases, an impasse over loan modification terms after a
default would lead to a requirement for the agent or servicer to
commence, and proceed with, foreclosure of the collateral and the
pursuit of other realization efforts.
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