Canadian Defeasance
Commercial Defeasance closed the first Canadian commercial mortgaged back securities (CMBS) defeasance in 2002. Since then, we have structured more Canadian defeasances than all of our competitors combined. As the unmatched leader in defeasance facilitation, our deep industry relationships, experience and knowledge of the Canadian market help us to actively manage each transaction and save our clients valuable time and money.
What is defeasance?
Many fixed-rate conduit/CMBS loans originated since 1999 in Canada do not contain rights of repayment or yield maintenance provisions and instead require borrowers to defease in order to sell or refinance their property. Put simply, defeasance is a substitution of collateral. Typically, the borrower pledges to the servicer a portfolio of government bonds sufficient to make all remaining debt service payments. Once the bonds are pledged to the servicer and delivered to an institutional securities intermediary who holds the bonds for the benefit of the loan servicer, the servicer will instruct the lender to discharge the mortgage/charge of record.
Why Commercial Defeasance?
Commercial Defeasance has defeased loans secured by all property types in every province, closed numerous defeasances with every servicer and their counsel, and closed many of the largest and most complex Canadian defeasances to date. We handle every step of the defeasance process from start to finish. We work with the master/primary servicer, servicer's counsel, accountants, rating agencies, title company, and securities intermediary to close the defeasance contemporaneously with the refinance or sale. No other company works harder throughout the defeasance process to make certain your defeasance closes on schedule. We have dedicated deal management teams who specialize in Canadian defeasance and are always available to explain the process. Our structuring of the bond portfolio is renowned and unparalleled in the industry. Additionally, because we are not owned by a bank or broker, we are able to insist that the broker utilize cost saving measures for our clients in regards to the final purchase of the securities.
How do we save you money in the process?
Our team makes certain that the bond portfolio incorporates the highest yielding collateral allowed under the loan documents and available in the marketplace, and we seek to implement other less obvious but equally effective cost saving strategies. We perform all this structuring internally, so the portfolio is always unbiased and fully optimized for the lowest cost. We also monitor all pricing from the broker dealer and are the only company to confirm in writing that there will be no undisclosed mark up in the final securities cost. We eliminate the risk of hidden profit in the securities purchase and can use proprietary software to check the market pricing of every security that comes back from the broker dealer. This is just another way that we help you Defease With Ease®.
Is there a Successor Borrower?
A release of the borrower's payment obligations under the loan could create a novation or taxable event to the certificate holders, so a defeasance in Canada does not include a third party successor borrower that assumes the borrower's obligations under the defeased loan. At closing, the borrower is only released from its obligations related to the real estate. The obligations of the borrower under the Commitment Letter survive (including ongoing payment obligations). However, after the defeasance, payment and performance are secured by the portfolio of government bonds.
How do I get started?
Call us at 1-800-624-4779 or send us an email at canada@cdfllc.com. We will be happy to provide you with a complimentary defeasance cost estimate and answer any questions you may have about the process. We will do everything we can to help you Defease With Ease®!