Westfield Stratford CMBS delayed pending CRD retention rule clarification

Deutsche Bank and Credit Agricole CIB have this morning pulled the single tranche £750m Westfield Stratford City CMBS, pending clarifications over the legitimacy of the decision to not retain a 5% stake in the capital structure of the agency securitisation.

Credit AgricoleCoStar News understands that several investors, amounting to a significant minority of the expected 15 to 20 separate accounts lined up to take the notes, have sought clarity over the two investment banks’ interpretation of the European Commission’s Capital Requirements Directive (CRD) retention rules.

The original CRD rules were designed to align the interests of arrangers of securitisations with those of investors. In the case of true sale securitisations, arranging banks are required to hold 5%, while for agency deals sponsors tend to hold a 5% stake.

Part of the reason why Deutsche Bank and Credit Agricole CIB proposed no retention rule for the Westfield Stratford City Finance PLC CMBS – for either the banks or the sponsors – is that the agency transaction only has one tranche of bonds. 

As such, it does not technically fall within the definition of CMBS under CRD requirements which defines a securitisation as comprising multiple tranches of bonds, which is a widely accepted market view.

However, some investors are taking a conservative view on this difference and are suggesting if a transaction looks like a CMBS there should be a 5% retention within the capital structure.  While the risk that the interpretation by Deutsche Bank and Credit Agricole CIB is incorrect is likely very low, the consequences of this would be very high. 

Indeed, investors’ caution is thought to be predicated on the possibility of penal regulatory capital charges against any investment in a CMBS which does not incorporate a 5% retention which is subsequently deemed to require such.

While the revised timetable is at the decision of the sponsors – Westfield Corporation, Canada Pension Plan Investment Board (CPPIB) and Algemene Pensioen Groep – a probable re-launch of the CMBS could come by early autumn, CoStar News understands.

Yesterday, CoStar News reported on the official pricing guidance of for the £750m AA-rated issuance, at between 87-90bps over three-month LIBOR, which reflects a 15 to 20 basis points pick-up on equivalent AAA-rated notes in recently issued German multi-family deals in secondary CMBS markets.

The single loan refinances the existing £550m senior loan financing syndicate, jointly led by Eurohypo, HSBC and CA CIB in August 2011, in a process dubbed Project Agora.

The 1.9m sq ft Westfield Stratford City shopping centre, Europe’s largest urban shopping and leisure destination and valued at £1.95bn by CBRE in May 2014.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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