Senior CMBS Holders Miss Out on Structural Flaw, Fitch Says

Holders of senior commercial mortgage-backed bonds aren’t getting paid what they’re owed because of a breakdown in the subordination of many transactions, according to Fitch Ratings.

Cash recovered from defaulted loans is often allocated to pay interest to all classes of bondholders before top-ranked investors are paid their principal, analysts Emmnanuel Baah and Euan Gatfield wrote in a report today.

“A portion of junior bond interest will be paid in priority to senior principal, even at the risk of a final senior principal deficiency,” the analysts wrote.

To contact the reporter on this story: Esteban Duarte in Madrid at

To contact the editor responsible for this story: Paul Armstrong at

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