Trepp Special Alert: A Dubious Distinction: 2007 Deal Becomes First Conduit to See Super Seniors Hit With Shortfall

NEW YORK, NY -- The MSC 2007-HQ13 deal earned the dubious distinction of becoming the first CMBS conduit deal to have interest shortfalls reach the super senior classes.

The HQ had stood for “High Quality” when the bonds were first issued, but bond owners might beg to differ.

The deal is one of the 25 CMBS issues that makes up part of the CMBX 5 Credit Default Swap Index.  Prior to the March remittance report which came out late Friday, shortfalls had reached the A-J class.  The latest remittance report had shortfalls hitting classes A-2, A-3, A-1A, and A-M, and X.

The deal is far from out of the woods and before all is said and done, losses could reach the tranches that were originally AAA.  Thus far, nine classes of bonds have been extinguished by collateral losses. That has made the F class – originally rated BBB plus – the first loss class.

 The F class’ balance has already been reduced by almost 75%. Still to be processed is a loss on the Pier at Caesars. 

That $80.5 million loan was carrying a $62.7 million appraisal reduction – enough to wipe out all bonds up to the A-J class. 

 This month that amount was bumped up to over $80 million – indicating a 100% loss (or more) is possible.  That would be enough to wipe out 25% of the A-J class.

The  interest shortfalls on the super seniors could be around for a while.  According to the March remittance report, the Pier loan still has $9.4 million in advances left to be reimbursed to the master servicer.  (We are not certain why any interest was paid to the super seniors at all, considering this number).

Contact:

Eric R. Gerard

Senior Vice President

Great Ink Communications

27 Union Square West, Suite 205

New York, NY 10001

(212) 741-2977