Suit Could Affect Investment Grade CMBS

It is not only the below investment grade classes in U.S. commercial mortgage-backed securities transactions that can be adversely affected if GMAC Commercial Mortgage loses a class action lawsuit, said Fitch Ratings, New York.Investment grade bondholders in the single borrower and large loan arena are at risk of extraordinary expenses. The suit, certified in June 2004 as a class action, was filed by a borrower whose loan is in the GMAC 1999-C1 trust over the issue of forced-placed terrorism insurance. GMACCM has put through expenses related to the suit across 178 trust pools; these are part of the suit because they contain loans originated before the attacks of Sept. 11, 2001. "Single borrower and most large loan deals do not have non-rated classes or other provisions to cover extraordinary expenses, so the investment grade classes in these deals are more likely to be shorted interest than other investment grade bonds when unusual legal expenses or other fees or expenses are incurred," said Mary MacNeill, managing director, Fitch Ratings. "Some structural protection for single borrower and large loan bondholders should be in place in order for all classes with the same ratings and similar credit profiles to perform similarly." Fitch can be found online http://www.fitchratings.com.