- resources in finance

Euromoney Training

Workshop on

Commercial Mortgage-Backed Securities

presented by
Professor Ian Giddy
New York University

What the Course is About
Commercial mortgage securitization represents one of the fastest-growing segments of the structured finance market. This two-day course offers an overview of the techniques of commercial property finance with a special emphasis on the securitization of commercial mortgage finance. 

Method and Schedule
The lectures will offer structure, the discussions will amplify, and the case studies will apply tools and concepts to real-world applications. Participants will work in teams to solve problems in commercial real estate financing. The final session will include a team negotiation to complete the financing of a pool of commercial property loans.

Participants will be provided with a package of materials useful to the structuring and analysis of commercial mortgage-backed deals, including pertinent articles, rating agency reports and sample documentation from actual deals done in the US, Europe and elsewhere.

Who Should Attend?
The seminar is of relevance to both potential originators and investors in commercial mortgage-backed securities: property finance professionals, commercial lenders and investment bankers, securities analysts; investment officers and fund managers; real estate developers and other individuals whose professional future may be enhanced by an understanding of CMBS techniques.

Issues to be Discussed

  • What distinguishes commercial mortgage securitization from residential mortgage securitization?
  • What are the key legal issues, and how are they addressed in the case of CMBS?
  • What drives ratings of CMBS?
  • What is the track record of default and recovery?
  • Highly leveraged commercial mortgage loans: debt or equity?
  • Who bears the balloon risk in CMBS?
  • How can one evaluate different CMBS structures?
  • What is the role of the servicer? And the special servicer?
  • What is the role and pricing of the super-senior tranche of some CBS?
  • How do synthetic CMBS work?
  • How is a CMBS deal structured?

Course Outline

Commercial Mortgage Backed Securities

Day Topics 
Day 1
Securitzation Finance
Overview of the global market
How ABS deals are structured
Key legal issues in MBS, CMBS and REITs
Rating securitizations

Commercial Mortgage Securitization
Residential MBS
Commercial MBS: retail, office, multifamily, hotels, etc
Legal structures

Single-property securitization

Single-borrower/multi-borrower CMBS
CMBS conduits
Highly leveraged CMBS
Sale-and-leaseback structures

Rating of Commercial MBS
Key risks: default and recovery, prepayment/extension, liquidity
Gaining security interests in the loans and the properties
Analysis of commercial mortgage loan pools
Loan analysis and cross-collateralization
Stress testing mortgage defaults
CMBS modelling
Understanding waterfalls and prepayments in CMBS
Call protection
DIversification in the pool -- what factors?
Servicing: subservicer, master servicer, special servicer

Day 2
Credit Enhancement in CMBS
Methods of credit enhancement
Concepts of LTV in CMBS
Senior-subordination credit support
Spread and reserve accounts; liquidity facilities
Funding the residual
Understanding and managing the balloon payment risk in CMBS
Default and workout

Multi-Tier and Super-Senior CMBS
Why have a multi-tier funding structure?
Senior, mezzanine, subordinate AAAs
Planned balance classes
Interest-only classes

Synthetic CMBS
True sale versus synthetic: the choice
Role of credit derivatives in the CMBS market

Structuring and Pricing a CMBS deal
Steps in setting up the structure
Getting a rating
Placing the debt
Exercise: arranging a deal. Teams negotiate the credit enhancement and financing of a pool of commercial property loans.
Pricing the securities
Understanding the economics


Case Studies

Belenus: A French Property Loan Securitization
Bear Stearns Commercial Mortgage Trust
Wachovia Bank Commerical Mortgage Trust
Perseus UK Commercial Loan Conduit
Castenea Synthetic CMBS
European Property Capital Hybrid CMBS

Background Reading

Anthony Sanders, Commercial Mortgage-Backed Securities
S&P, CMBS Property Evaluation Criteria
Fitch, Securitization of Sale and Leasebacks

CMBS Documentation

Sample commercial mortgage agreement
Sample leasehold agreement
Sample intercreditor agreement
Sample closing checklist
Sample CMBS documentation checklist
Glossary of CMBS terminology

Workshop Instructor
Ian Giddy is on the faculty of finance at New York University, USA. He has taught finance at NYU, Columbia, Wharton, Chicago and abroad for the past thirty years. He was Director of International Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The author of more than fifty articles on international finance, Dr Giddy has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous financial institutions and corporations in Europe, North America, the Middle East and Asia. He has lectured in more than forty countries, and has been involved in the asset-backed securities market for over 15 years. He is the author or co-author of The International Money Market, The Handbook of International Finance, Cases in International Finance, Global Financial Markets, Asset Securitization in Asia, and The Hudson River Watertrail Guide. | | | | contact
Copyright © 2006 Ian H Giddy. All rights reserved.