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

Rights to Replace the Agent/Servicer
• In syndicated loans that are not tranched, the usual removal provision
permits the other lenders (in some cases, acting unanimously, in other
cases, acting through a super-majority of the holders other than the
administrative agent) to remove the administrative agent, but only for
gross negligence or willful misconduct.
• In cases where the administrative agent is the A holder, the B holder’s
rights to replace the administrative agent are generally limited to cases
of gross negligence or willful misconduct. However, B holder may
need to enlist the support of all or a super-majority of the other lender.
• If the administrative agent is the B holder, the A holder may expect to
have rights to replace the administrative agent if a Control Appraisal
Event exists, so that the B holder cannot preserve, through the
prerogatives of the administrative agent, the control over the loan
which it is supposed to forfeit as a result of the Control Appraisal
Event.
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