Uni-Invest CMBS noteholders prepare for ‘Texas shootout’

Noteholders of the defaulted Opera Uni-Invest CMBS are to meet on Tuesday to decide between two competing workout options for the underlying portfolio of Dutch office and logistics assets. The case is being closely monitored as industry experts say the solution may well become the model for dealing with other distressed securitisations.

Valued at EUR 900 mln at the peak of the market, the B-grade Uni-Invest portfolio is burdened by a EUR 750 mln securitised bond. The facility has been in trouble since 2010 ahead of the formal default on the maturity deadline in mid-February this year. Attempts to sell the 1.1 million m² portfolio at a 40% discount were unsuccessful last year.

Two alternatives are now on the table: a consensual restructuring is being proposed by asset manager Valad Europe, and a credit bid by private equity firms TPG Capital and Patron Capital.

The ‘dual-track’ approach has been put forward by the original lender and special servicer Eurohypo and its adviser Cairn Capital to encourage the divided noteholders - ranging from senior class A notes to more junior B, C and D notes - to reach a consensus.

All noteholder classes, in descending order from D to A, will vote on Valad’s ‘consensual restructuring option’ at the Amsterdam office of law firm Baker McKenzie on 17 April.

This option offers a level of return on paper for all noteholder classes. But if it fails to attract 75% backing, class A noteholders will meet separately to vote on the TPG/Patron bid. This option would result in recovery for Class A noteholders only.

Market watchers say the outcome of the voting remains uncertain with one source likening the situation to a ‘Texas shootout’ - theoretically each option has a 50:50 chance of emerging victorious.

One of the complicating factors is that some of the participants have cross-note holdings (class A notes and more junior paper). Class A noteholders with a foot in two or more camps may want to hedge their bets and vote in favour of both options.

There is a third option besides the good and the bad, but that one is really ugly. Should both of the alternatives outlined above get shot down, this would leave behind a ‘zombie’ once the smoke clears. A zombie is a colourful analogy for a fire sale with limited potential for returns for all parties.