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

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What is a “Control Appraisal Event” • Expressed as a formula, this amount equals the amount by which: • (a) $101,000,000, representing the sum of: • $100,000,000 (the outstanding principal balance of such mortgage loan), plus • $1,000,000 (all accrued and unpaid interest on such mortgage loan), plus • $0 (for unreimbursed advances and interest thereon in respect of such mortgage loan; unpaid real estate taxes and assessments, insurance premiums, ground rents and other unpaid amounts which were required to be deposited in any escrow account; and other unpaid sums on the mortgage loan), exceeds • (b) $81,000,000 ($90,000,000 appraised value of the related mortgaged property multiplied by 90% ―haircut‖), plus $0 (the amount of any escrows or reserves held in respect of the related mortgage loan). • Using these assumptions, the Appraisal Reduction Amount equals $20,000,000 ($101,000,000 minus $81,000,000). 27
What is a “Control Appraisal Event” • A Control Appraisal Event exists if: (x) the initial balance of the B tranche ($25,000,000), minus the sum of: (i) the payments of principal that have been allocated to the B tranche ($0), (ii) the Appraisal Reduction Amount ($20,000,000) and (iii) actual realized losses that have been allocated to the B tranche ($0), is less than (y) 25% of the initial balance of the B tranche ($25,000,000) minus the payments of principal that have been allocated to the B tranche ($0). • Based on these assumptions, a Control Appraisal Event exists because (x) $5,000,000 ($25,000,000 minus $20,000,000) is less than (y) $6,250,000 (25% x $25,000,000). 28
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 25 and 26: What is a “Control Appraisal Even
Page 27: 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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