Hayfin Seeks Ruling on Pre-Crisis CMBS, Following Credit Suisse

Hayfin Capital Management asked a U.K. court to determine how interest should have been calculated on commercial mortgage bonds that were structured to continue paying even when underlying loans defaulted.

The request, which centers on a 2006 Lehman Brothers Holdings Inc. securitization, has been filed at the High Court, according to a statement from the issuer of the bonds, Windermere VII CMBS Plc. A Hayfin unit holds Class X notes in the transaction, according to a court filing.

Hayfin’s move may increase the focus on Class X notes, which let holders avoid the fallout from a real-estate market collapse after the financial crisis even as other investors in the same securitizations were wiped out. Credit Suisse Group AG’s asset management unit similarly last month asked the court to determine what level of interest should be paid on its Class X holdings in four CMBS transactions, which could potentially lead to money being taken back from other noteholders.

Zinka Bozovic, a spokeswoman for Hayfin, who is employed by Hawthorn Advisors, declined to comment on the court proceedings and the London-based investment firm’s CMBS holdings.

A Hayfin unit also asked the court to determine whether an event of default has occurred on Class B securities in the Lehman CMBS. It holds some of these notes.

CMBS originators introduced Class X notes in order to extract profit from transactions and reduce tax. Some notes were subsequently sold to investment companies and hedge funds. The Class X notes were disclosed to investors in deal documents.

The case is Hayfin Opal Luxco 3 Sarl & Ors v. Windermere VII Cmbs Plc & Anr in the High Court of Justice, Chancery Division case no. HC-2015-004808

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