Best practices in commercial real estate financing: essential issues in negotiating A/B note intercreditor agreements†

In this quarterly feature the nuts and bolts of loan document structuring and negotiations are investigated, as well as the closing process and loan administration. This issue's paper examines the most hotly negotiated legal issues between the senior and junior lenders in the context of A/B notes originated for the REMIC securitisation market, where both the senior (A) and junior (B) note share a mortgage interest in the same real property. The paper outlines the ways in which the holder of the B note may attempt to protect its interest in the face of actions by the A note holder that could otherwise modify or reduce the borrower's obligations to the B note holder, or eliminate the collateral for the B note. In each case, the author suggests typical compromise positions that should satisfy both the B note holder and the holders of all tranches of the securities backed by the A note. Copyright © 2002 Henry Stewart Publications