Breaking: WeWork Banks on Brokerage Business
2 days ago
"Goldman may have simply decided the Libor plus 175 basis points investment was attractive for their own internal investment, whereas large banks are still in a loan exposure reduction mode," said Darrell Wheeler, senior managing director at Amherst Securities Group in New York.
"Not having a rating is fairly experimental and it was likely difficult to find investors for more than a billion of unrated paper," Wheeler said.
Dan Nigro, chief executive of Warfield Consultants, a Montclair, N.J., firm focused on asset-backed and residential mortgage-backed securities, thinks this bond is a precursor to other unrated bonds because the ratings agencies have been discredited during the past few years.
"There is an entire market that trades without ratings and there are enough people who can evaluate these bonds without needing ratings so there will be an evolution to a private market that will be largely unrated," he said.
That type of gamesmanship is highlighted in two recent lawsuits related to the bankruptcies of Innkeepers and Extended Stay. In the Innkeepers case, LNR Partners Inc. alleges in a lawsuit filed Oct. 27 in New York state Supreme Court that another investor reneged on an agreement to name LNR the special servicer overseeing Innkeepers' $825 million CMBS loan.
LNR alleges that it had a pact with CRES Investment, a division of Presidio Holdings II LLC, stipulating that CRES would hire LNR as special servicer if CRES's slice of the mortgage was deemed the controlling stake. As a side bet, LNR bought slices of the mortgage on its own to better its chances of getting the designation.
However, LNR claims in its lawsuit that CRES, once it was named controlling stakeholder, didn't hire LNR, instead keeping Midland Loan Services as special servicer. "CRES' failure to comply with its contractual obligations is depriving LNR of its bargained-for right to control workout and resolution of the Innkeepers loan," the lawsuit reads.
CRES representatives didn't return calls seeking comment. LNR declined to comment.
A similar dispute emerged in the Extended Stay bankruptcy. Trimont Real Estate Advisors Inc. alleges in a lawsuit filed Sept. 21 in U.S. District Court in Washington, D.C., that rival special servicer CWCapital Asset Management LLC owes it a portion of a $19 million restructuring fee. CWCapital received the fee as special servicer of Extended Stay's $4.1 billion securitized mortgage.
However, Trimont said it is entitled to some of the fee because it was the special servicer in the case for roughly a year.
Prior to a bankruptcy auction that resulted in a sale of Extended Stay and its 680 hotels, Trimont was abruptly replaced as special servicer with CWCapital by investors Bank of America Corp., UBS Securities and Cerberus Capital Management LP.
CWCapital has asked a judge to dismiss the case, noting in its court filing that "during the nearly one year that Trimont was the special servicer, it had no success working out the loan or resolving the bankruptcy case."
The NCUA plans to conduct 8-10 resecuritizations totaling $35 billion, but all of the other deals will be backed by residential MBS. The first such offering, a $3.9 billion issue, priced Oct. 18.
After this week's offering, the agency still has about $560 million of CMBS from other failed credit unions. A spokesman said the NCUA doesn't plan to resecuritize them. While the agency didn't specify an exit strategy, it will presumably sell the remaining paper in the secondary market.
The CMBS resecuritization (NCUA Guaranteed Notes Trust, 2010-C1) is backed by bonds from the investment portfolios of Western Corporate Federal Credit Union and U.S. Central Corporate Federal Credit Union, which were seized last year.