Merrill Lynch Financial Assets announced the occurrence of a monetary event of default (EOD) on a subordinate B loan.
This monetary EOD relates to two senior loans in the C-19 and C-20 securitizations that caused a triggering EOD under the related co-lender agreement.
Because of this occurence, the sevicer Midland Loan Services issued a Purchase Option Notice to Northcastle Loan on Jan. 12 pursuant to Section 10(1) of the co-lender agreement that entitles Northcastle to exercise a limited option, for a period up to 60 days, to buy the senior loans for a purchase price that is generally equal to par.
In the event that Northcastle exercises this option to buy the senior loans, the Merrill unit expects that the price of the Class XC certificates in each of the C-19 securitization and C-20 securitization will be materially and adversely affected.
According to a release from Merrill Lynch Financial Assets, the senior loans affected are: (a) loan control No. 4 (the "C-19 senior loan") in the Merrill Lynch Financial Assets Commercial Mortgage Passthrough Certificates, Series 2006 - Canada 19 (the C-19 securitization) issued pursuant to a short form prospectus dated June 14, 2006; and (b) loan control No. 8 (the C-20 senior loan and together with the C-19 senior loan, collectively, the senior loans) in Merrill Lynch Financial Assets Commercial Mortgage Passthrough Certificates, Series 2006 - Canada 20 (the C-20 securitization) issued pursuant to a short form prospectus dated October 20, 2006.
The release said that the C-19 senior loan, having a current principal balance of around $25,893,003.83 and the C-20 senior loan, having a current principal balance of about $25,893,003.83 are two of three companion loans secured by first mortgages secured by five hotel mortgaged properties located in the Province of Ontario.
The senior loans have been separately securitized in the C-19 Securitization and C-20 securitization and are held by Computershare Trust Co. of Canada, as custodian and nominee for certificateholders in the related securitizations.
The third companion loan secured by the same first mortgages (the B Loan), having a $23,000,000 current principal balance, is subordinate to the senior loans and is held by Northcastle.
The rights and obligations of the holders of the Senior Loans and the B Loan are governed by a co-lender agreement dated October 27, 2005 between Merrill Lynch Capital Canada as initial note A-1 lender, Merrill Lynch Capital Canada as initial note A-2 lender and Northcastle Loan as initial note B lender as amended and assigned from time to time (the co-lender agreement). The co-lender agreement was filed on SEDAR on June 23, 2006 as a material contract.
Merrill Lynch Financial Assets is a special purpose issuer corporation that issues ABS in the private and public capital markets.