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

The Servicing Standard Override
• However, unlike the approach reflected in the Unanimous Decisions,
the servicing standard override does not contain bright lines and is
based on rather vague concepts of ―the best interests of the lenders
as a collective whole‖ or ―taking into account the relative priorities of
the A tranche and the B tranche.‖
• This lack of bright lines may invite disputes, particularly in cases
where the special servicer is considering a reduction/forgiveness of
principal or other action that would materially adversely affect the B
holder.
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