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ARTICLE · 14 OCTOBER 2015

Securitisation Alerter: A Matter Of Principal

Fieldfisher
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The Gemini (Eclipse 2006-3) CMBS transaction has provided another example of short-comings in pre-crisis commercial loan and securitisation structures; this time the court had to decide what constitutes revenue and principal for the purposes of the structure's payment waterfalls.

United KingdomFinance and Banking
Guy Usher
Guy Usher
Alex Campbell
Alex Campbell
Edward Miller
Edward Miller

The Gemini (Eclipse 2006-3) CMBS transaction has provided another example of short-comings in pre-crisis commercial loan and securitisation structures; this time the court1 had to decide what constitutes revenue and principal for the purposes of the structure's payment waterfalls.

Background

In 2006, Barclays Bank plc ("Barclays") refinanced a portfolio of UK commercial properties owned by a number of Guernsey-registered limited partnerships. The senior loan was in turn refinanced and securitised through Barclays' Eclipse CMBS platform, under which Gemini (Eclipse 2006-3) Plc (the "Issuer") issued floating rate notes (the "Notes") divided into classes A to E, the class A notes being the most senior. Following the financial crisis, the underlying properties securing the loan significantly decreased in value and the borrowers had significant reductions in the rental income which was needed in order to service the loan. In addition, the interest rate swap with

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