Fundamental differences between standard commercial mortgage-backed securities pooling and servicing agreements (PSAs) and the U.S. bankruptcy process could be a significant issue in future workouts. The conflict emerged during the bankruptcy proceedings for Extended Stay, a CMBS borrower that filed for Chapter 11 in mid-2009, but was resolved mostly within the guidelines of the deal's PSA.
"This issue looms over the entire industry," said Mark Edelstein, chair of Morrison & Foerster's distressed real estate group. "Given the amount of CMBS debt coming due in the next few years, it would not be a surprise to see this coming up again."
If an ....