Parties to a Defeasance

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The many parties to a defeasance can have different levels of involvement. The core working team typically consists of the following:

• Defeasance Advisor: Capital Defeasance Group guides the entire defeasance process as the Borrower’s advocate; designs the optimal, lowest cost securities portfolio; and arranges the purchase of the securities through a competitive bidding process among unaffiliated broker/dealers. We also coordinate the formation of the Successor Borrower entity through our affiliate, Successor Borrower Services.
• Servicer/Counsel: Lender/Servicer and its counsel
• Borrower/Counsel: Original Borrower for the loan and its counsel
• Successor Borrower/Counsel: Successor Borrower assuming the loan and its counsel
  

  

  
  Capital Defeasance Group guides all the parties through the defeasance process, ensuring that all Servicer requirements are satisfied and that that the defeasance will close on time and simultaneously with the Borrowers’ sale or refinance transaction. We work closely with the Original Borrower and Borrower’s Counsel, and coordinate closely with Servicer’s Counsel who drafts and finalizes most of the defeasance documents.

  The other parties or entities who are typically involved in a defeasance include:

• Servicer: Servicer of the CMBS pool which holds the loan
• Special Servicer: If specified by the documents, the Special Servicer can act on behalf of the lender instead of, or in coordination with, the Master Servicer
• Securities Intermediary: Holds and transfers securities on behalf of the Borrower; receives interest and principal payments from the securities portfolio; makes regular loan payments to the lender on behalf of the Successor Borrower
• Broker/Dealers: Capital Defeasance Group holds auction to determine which broker/dealer will purchase the defeasance collateral securities
• Accountant: Recognized national CPA firm who delivers a report stating that the securities portfolio will generate adequate cashflows to make all remaining loan payments through to maturity
• Successor Borrower: Entity that assumes loan obligations, owns securities portfolio, and makes loan payments until loan maturity (read more on Role of Successor Borrower)
• Successor Borrower’s Counsel: Forms Successor Borrower as special purpose bankruptcy-remote entity, issues required Successor Borrower opinions (bankruptcy remote, proper formation, in good standing) to enter the defeasance transaction
• Title Company: Records release of lien on real property upon closing. Manages escrow account and disburses funds per instructions from Servicer counsel.

Capital Defeasance Group has strong relationships with a network of various broker/dealers, trusted securities intermediaries and accounting firms as well as skilled counsel who assist us in executing the many steps of the defeasance transaction. Capital Defeasance Group has prenegotiated the professional fees with this third party network to ensure the lowest possible costs for our clients. Our large and experienced network ensures a reliable and timely closing of the defeasance and your underlying real estate transaction.

Finally, there are several parties who may or may not be involved depending on the specific situation and features of the defeasance in question:

• Rating Agencies: Each rating agency has its own specific criteria, but all agencies will review defeasances for large loans or loans representing a significant portion of the affected loan securitization pool. Typically, two rating agencies must approve the defeasance and issue “no-downgrade” letters prior to closing. This can add several weeks to the process and cost the borrower additional rating agency and rating agency counsel fees.
• Buyer and/or Buyer’s Counsel (If defeasance part of a sale)
• New Lender and/or Lender’s Counsel