Operatic structured finance

Like the plot-line of a tragic libretto, Opera Finance CMH ’s good fortune has taken a sudden turn for the worse.

Cue the ballad.

Opera CMH is one of the few commercial mortgage-backed securities (CMBS) deals with significant exposure to Irish real estate — including shopping centres in Dublin. Given the extent of Ireland’s property crash, it’s been fairly amazing how Opera has been able to keep the valuations of its real-estate pretty steady.

In June for instance, Opera’s properties were being valued at €534,989,641, giving it a loan-to-value ratio of 70 per cent. Fitch Ratings had been pretty skeptical of some of Opera’s valuation, saying back in January that an LTV of 101-127 per cent might have been more realistic.

Finally on Thursday, we got the following statement from Opera:

The Borrower expects that the Junior Loan will be transferred to NAMA later this month. As instructed by the Junior Lender, the properties were revalued by DTZ Sherry at €342,190,000 as at 30 November 2009.

That’s a rather big drop over the course of four months. And as Michael Cox over at Chalkhill Partners notes, it pushes up the deal’s loan-to-value ratio to 110 per cent. It’s not a problem for the senior loan, but the junior loan — the one going into the Irish government’s Nama – has an LTV covenant which might just have been broken.

Lucky then, the Irish taxpayer is about to take the whole operatic bond off the junior investors’ hands.

Deus ex machina, and all that.

Copyright The Financial Times Limited 2019. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Read next:

Read next:

FT Alpha Tweets