Hatfield Philips embroiled in Windermere resignation row

Special servicer neither terminated nor resigns from Windermere duties

European loan servicer Hatfield Philips International has failed in an attempt to resign as special servicer to two CMBS loans, after querying whether conditions had been met to terminate its appointment.

HPI announced its resignation on 5 June, the last day of a 30-day notice period of intention to terminate its appointment as special servicer to the €110.4m Sisu and €6.5m Queen Mary loans in the Windermere XIV Lehman conduit CMBS.

The termination notice was made by Lone Star, which owns the B note loans secured on the Sisu and Queen Mary properties and so is the controlling class in the transaction. A change of special servicer did not require the consent of other noteholders.

But HPI questioned whether the pre-conditions for its replacement had been met, because a condition of transfer was that the original rating agencies of the CMBS must give rating agency confirma­tions (RACs) that the replace­ment would not adversely affect the ratings for the notes.

But last December, Fitch, which rated Windermere XIV, surprised the market by announcing that it would no longer provide European RACs.

Windermere XIV’s trustee, US Bank, said the RAC condition could be waived after discussions with Fitch, and with Standard & Poor’s and Moody’s, which were willing to provide RACs.

Matthias Schulter, managing director of HPI’s parent, LNR Partners Europe, told Real Estate Capital that the US Bank’s decision had been made in isolation and did not mean the termination was effective.

“We worked diligently for two and a half weeks to obtain clarification and when we couldn’t we decided it was in the best interest of noteholders to resign,” said Schulter.

Then, on 13 June, the deal’s issuer announced that the pre-conditions had “not yet been satisfied” and Hatfield Philip’s resignation “was not effective”.

Schulter added: “We believe it is critical for the credibility of the CMBS industry that existing transaction governance terms and requirements are observed.

“The requirements for the replacement of a special servicer first and foremost serve for the protection of notehold­ers’ interest.”

Late last year, Lone Star twice attempted to remove HPI as master servicer on all the Windermere XIV loans, for which a noteholder vote was required. It proposed replacing HPI with its own captive servicer, Hudson Advisors. Both votes were narrowly lost and HPI is still servicer on the five other Windermere XIV loans.

This time Lone Star proposed replacing HPI with Mount Street, the new servicing business set up in March by Ravi Joseph, Paul Lloyd and Bill Sexton. Ravi Joseph said: “Trustees and investors would like to see this situation clarified and resolved.”

LNR Property was bought in April by debt investor Starwood Capital Group and Starwood Property Trust. LNR is to be integrated into Starwood rather than run as a separate business (see more).