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

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What is a “Control Appraisal Event” • A ―Control Appraisal Event‖ results from a decline in the value of the real property security for the loan to a degree which causes a significant impairment of the collateral for the B note, following certain defaults or other ―Appraisal Reduction Events.‖ 23
What is a “Control Appraisal Event” • Generally, whether a Control Appraisal Event exists hinges upon whether the value of the real property collateral for the loan, as determined after an ―Appraisal Reduction Event,‖ plus the cash reserves that are maintained for the loan, fall below a level which supports a stated percentage of the principal of the B tranche plus 100% of the principal of plus interest and other sums due on the A tranche. • For these purposes, Standard & Poors requires the collateral to be valued at 90% of its current appraised value, and pegs the percentage of the impairment of the principal of the B tranche at which a Control Appraisal Event is triggered at the point where the collateral value covers less than 25% of the principal of the B tranche. 24
Page 1 and 2: ©2012 Morrison & Foerster LLP | Al
Page 3 and 4: A/B Tranching of Commercial Real Es
Page 9 and 10: “Pari Passu” vs. “Sequential
Page 11 and 12: Identity of the B Participant/Trans
Page 13 and 14: Identity of the B Participant/Trans
Page 15 and 16: Servicing Standard • In transacti
Page 17 and 18: Approval and Consultation Rights of
Page 23: Approval and Consultation Rights of
Page 27 and 28: What is a “Control Appraisal Even
Page 35 and 36: The Servicing Standard Override •
Page 37 and 38: B Holder’s Cure Rights • The B
Page 39 and 40: B Holder’s Purchase Option • Ma
Page 41 and 42: B Holder’s Purchase Option • Th
Page 43 and 44: Rights to Replace the Agent/Service
Page 45: Rights to Replace the Agent/Service

A/B Tranching of Commercial Real Estate â Secured Loans: An ...

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