by John Galt
May 10, 2012 19:10 ET
If Jamie Dimon was having a bad day before the conference call and 10Q release this afternoon, add this story from the Wall Street Journal to the mix:
Ouch. The money phrase from the article is what the bankruptcy judge did and the pain inflicted on the banksters which could trigger a wee bit of panic in the supposedly “safe” CMBS market:
A $207 million loan on a pair of Westin hotels has rattled commercial mortgage-backed securities investors after a bankruptcy court ordered that the loan’s maturity be extended by an unusually lengthy period and its interest-rate slashed to zero, according to analysts.
U.S. Bankruptcy Court Judge Eileen W. Hollowell in Tucson, Ariz., as part of a reorganization of borrower Transwest Resort Properties in December, ordered the troubled loan be extended by 15 years, to 2033, and increased the principal by $40 million. The judge also cut the interest rate to zero.
Bank of America analysts, based on a servicing document recently made available to bondholders, on Monday noted that the interest-rate cut, if finalized, would exacerbate shortfalls in interest payments already suffered in the two J.P. Morgan Chase & Co. CMBS that included the Westin loan. LNR Property, the firm servicing the loan for two CMBS trusts, is trying to appeal the modification, which sets a “truly bad precedent” for lenders, said Toby Cobb, LNR’s co-chief executive.
Ouch again. Perhaps, just perhaps, someone should wake up the Fed and advise them that QE∞ program underway.