The ability of investors in commercial mortgage backed securities (CMBS) to participate directly in a borrower’s restructuring was recently curtailed by a New York bankruptcy court, raising a number of practical restructuring considerations for distressed borrowers, special servicers and CMBS investors.
While it is clear that a CMBS trust itself has standing as a “party in interest” under §1109(b) of Title 11 of the United States Code (Bankruptcy Code) to participate in a borrower’s bankruptcy proceeding, prior to the decision of the court in In re Innkeepers USA Trust,1 the question of whether a certificateholder in a CMBS pool was a “party in interest” had not been specifically decided.
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