Pooling benefits are increasingly being removed from European CMBS as arrangers split pools into A/B portions or rake structure, with the A portion going to the CMBS issuer and the B portion sold as B-notes to parties outside the CMBS transaction. According to a report published by Standard & Poor's last week, this can have a negative effect on CMBS noteholders.
The absence of subordination adjustments within these A/B portions provide lower leverage within the CMBS transaction, which can have an adverse effect on noteholders. A traditional European CMBS transaction involves a pool of loans sliced into risk-weighted tranches. Each investor is exposed to risks of the combined pool of loans, with junior noteholders taking on greater risk.