Release date- 30072019 - Kroll Bond Rating Agency (KBRA) releases a new report, As Freddie Mac K-Series Defeasance
Accelerates, Supplemental Debt Slows, which discusses the meaningful increase in loan defeasances
that we have observed among Freddie Mac K-Series transactions, as well a decline in supplemental debt placements.
7 used the term in-substance defeasance
to describe this latter situation and specifically directed that it be treated in the same manner as a legal defeasance
(i.e., remove both trust assets and related debt from the government's statement of net position).
Just over $63 billion of that figure was eligible for either defeasance
or for incurring supplemental debt.
In a defeasance
transaction, a borrower substitutes new collateral in exchange for the lender's release of the old collateral.
The supplemental indenture eliminated substantially all of the restrictive covenants, certain affirmative covenants, certain events of default and certain conditions to legal defeasance
or covenant defeasance
contained in the indenture governing the Notes.
In some cases this has led to the establishment of specific public financial defeasance
structures, with significant support of government.
Merrill Lynch Japan has 'failed to fulfil its responsibility by proposing the strucutured-bond despite knowing that it did not effectively serve as a defeasance
for the bonds,' a Takefuji official said.
Grosch sees it differently: "What we did is what all the other so-called defeasance
models have been doing for 15 years, which is invest 100% of our money into film production.
a release of real property collateral may not cause the obligation to be principally secured by an interest in real property, other than a permitted defeasance
with government securities and
Accounting for Financial Assets and Financial Liabilities provides a comprehensive analysis of the major issues associated with accounting for transfers of financial assets, debt defeasance
transactions and hedge accounting.
In particular, they discussed the advantages of sinking-fund debentures and in-substance defeasance
. In a climate of rising interest rates, in-substance defeasance
becomes an attractive option to companies because it results in higher reported earnings and a lower debt-to-equity ratio.
Additionally, concentrations in several property types, such as lodging, self-storage, and manufactured housing have decreased, given loan payoffs and defeasance
The purchase price does not include USD 3.2 m for the completion of brand-mandated property improvement plans and USD 1.0m for the defeasance
of existing loans.
Commercial mortgage-backed securities (CMBS) defeasance
volume significantly increased over the past 18 months, jumping from $3.3 billion annually on average from 2009 to 2011 to $11.8 billion last year, reported Trepp LLC, New York.