Banks Price First Risk Retention Compliant U.S. CMBS Deal

The first U.S. CMBS deal designed to comply with the Risk Retention rule has been priced by three major Wall Street banks, according to a recent Reuters article. Each bank owns a slice of each class from AAA to unrated, attracting investors.

"In theory the banks will support the bonds, and you might see trading in blocks be much easier," said one portfolio manager. "But I think also (it was due to) a trend of more bank-originated collateral, rather than the potpourri of originators that throw whatever they have into the deal."

The banks also included two additional safeguards to the deal. The first of which is a new risk retention “consultation party” to consult with the servicers on any workouts of soured loans, and an enhancement that will call on a deal’s trustee to order an independent “fair value” appraisal on a property if a servicer opts to sell a defaulted property out of the trust, according to Reuters.

If you are interested in joining SFIG’s CMBS Committee, please contact Marshall.Bornemann@sfindustry.org.

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