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In a securitisation case on the interpretation of a servicing agreement in a commercial mortgage-backed securities (CMBS) transaction, the court was asked which party would have the right to require termination of the appointment of the special servicer and the appointment of a successor. The court looked at the interpretation of the contractual documentation rather than the terms of the offering circular.
The Chancery Division was asked in US Bank Trustees Ltd v Titan Europe 2007-1 (NHP) Ltd, a securitisation transaction case, to look at the interpretation of contractual terms which conflicted with terms in the Offering Circular for floating rate notes issued as part of a CMBS transaction. The dispute arose about which party within the structure had the right, on a particular event which related to the valuation of the underlying property portfolio, to appoint a successor servicer to replace the special servicer under the servicing agreement.
After much debate about the interpretation of particular definitions and clauses in three particular transaction documents (the servicing agreement, the intercreditor agreement and the Offering Circular for the CMBS floating rate notes), the court held that Titan Europe 2007-1 (NHP) Limited (the issuer), rather than the representative of a subordinated class of notes, was the party with the right to remove the special servicer and appoint a replacement.
The issuer was a special purpose company set up in Ireland for a CMBS structure as the issuer of floating rate notes. The underlying assets for the securitisation were hundreds of healthcare properties (the property portfolio) in the UK. £638m of floating rate CMBS notes due in 2017 were issued by the issuer in May 2007 in different classes and seniority ranging from Class A Notes to Class E Notes (the Notes). The senior Class A Notes were issued with a face value of
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