Wednesday, May 13, 2009

GGP LCDS Auction In Process

The General Growth Properties LCDS auction is currently ongoing, and just finished the Initial Bidding Period. The results will be posted in about 6 minutes, eventually followed by a final Dutch auction bidding process at 2 pm. The reason this is relevant as it could provide a significant repricing and valid market test of secured obligations in the CRE market.

The participating bidders in the auction is provided below (they will hopefully work not only on behalf of their prop desk but for their clients as well).

Bank of America, N.A.
Barclays Bank PLC
Citibank Global Markets Inc.
Credit Suisse International
Deutsche Bank AG
Goldman Sachs Loan Partners
J.P. Morgan Securities Inc.
Morgan Stanley Senior Funding, Inc.
The Royal Bank of Scotland PLC
UBS Securities LLC

Zero Hedge will be following this auction very closely.

The link to follow the GGP LCDS auction can be found here.

In other news, CRE's BFF - the CMSA, issued this press release earlier. It is good to know that CMSA is actively looking after the interests of commercial real estate players, and fighting tooth and nail to make sure not even one bid gets hit as malls continue on their steady path to zero tenancy. Regardless, Gropper, who has traditionally been one of the most erudite bankruptcy judges, is not expected to provide adequate protection for Bankruptcy Remote Entities which have been filed as part of the chapter 11 process, contrary to the rhetoric below. A CMSA adverse settlement will likely be a major hit to the CMBS market in particular, and to CRE in general.
CMSA Actively Involved in GGP Issue; Bankruptcy Judge to Rule Today

U.S. Bankruptcy Judge Allan Gropper plans to hold a hearing today in New York to rule on whether General Growth Properties, which filed for bankruptcy in April, will be allowed to access capital from its own special purpose entities, a move CMSA has strenuously objected to in recent weeks.

CMSA believes the inclusion of special purpose subsidiaries in the GGP bankruptcy filing may threaten the fundamental principles of structured finance and would negatively affect all of securitization. CMSA and the Mortgage Bankers Association filed an amicus brief with the U.S. Bankruptcy Court, Southern District of New York on May 1, 2009 to make its concerns known for the record. CMSA says borrowers receive favorable loan terms based on lender, investor and rating agency reliance on isolation of the commercial property from the credit exposure of affiliates of the borrower. CMSA believes the strategy pursued by GGP violates this principle and, if upheld, would put into question the reliability of the rule of law in commercial mortgage finance.

Moody’s Investors Service also weighed-in on the GGP matter, issuing a research report on the bankruptcy judge’s questions related to the recent bankruptcy filings. Moody’s highlighted adequate protection as a ‘well-worn’ bankruptcy concept, implying that Judge Gropper has hinted that adequate protection may be the path taken in his ruling tomorrow. As is common, a bankruptcy court determines what is ‘adequate’.

CMSA is actively involved in the events currently unfolding in New York and will update Membership regularly.
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