According to market sources, shortsighted criteria written into the documentation of franchise deal Global Franchise Trust 1998-1 is holding up the progress of a loan workout. Apparently, the servicer is unable to go forth with a settlement without obtaining consent from 100% of the investors.

"It's hard to get 100% approval for anything," said one source. "There might be 30 to 50 investors in this deal."

Most franchise deals have required approximately two-thirds investor consent to settle a workout with a material outcome.

In this case, it's said that servicer Orix Capital Markets has been unable to enter into any sort of settlement with defunct borrower Olajuwon Holdings, which filed for bankruptcy protection in January 2000. Entering into a settlement would constitute a modification of actual debt, calling for the extinction of existing debt, replacing it with new debt.

"I've heard it's really, really tied their hands," an investor source told ASR.

Apparently, because of securities laws, and difficulty with the Depository Trust Commission (DTC), merely identifying all the investors in a private deal can be a challenge. What's ironic is that the documents might have been written as such so that investors would have more control over the deal.

The Olajuwon loan accounted for more than 10% of the pool. The deal had a notional amount of $250 million, and was managed by Deutsche Banc. Global Franchise Trust was issued by Global Alliance Finance Co. (GAFCO), a shell operation of Deutsche Bank that has since been dissolved.

On the plus side, sources say the deal is in good shape, without substantial credit problems since Olajuwon Holdings, a Texas-based franchisee of Denny's, came out of bankruptcy with insufficient funds to maintain operations.

Olajuwon Holdings is owned by the brother of two-time NBA champion and top 50 all-time player Hakeem Olajuwon.

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