A six-year legal battle over a delinquent $44.9 million mortgage in a 1997 commercial mortgage-backed securities deal is over, with Nomura Securities, Orix Capital Markets and LaSalle Bank reaching a settlement over the loan. The terms of the settlement were not available by press time but more information is expected at the next payment to bondholders, according to a report from Standard & Poor’s
The loan was a part of Asset Securitization Corp. 1997-D5 and was secured by Doctors Hospital in Hyde Park, Ill., a Chicago suburb. The loan was the eighth-largest in the pool and defaulted shortly after the deal was completed. It has since been the subject of numerous lawsuits. Orix, the deal’s special servicer, tried to force the seller to buy back the loan, saying that it was not a qualifying mortgage. Additionally, LaSalle, the trustee, filed a lawsuit against Nomura and Asset Securitization Corp. that alleged breaches of reps and warranties. Asset Securitization Corp. also filed a suit against Orix.
The agency placed the transaction on credit watch with developing implications. “The settlement may have implications on trust liquidity that will affect the classes with ratings placed on credit watch,” said Barbara Hoeltz, credit analyst. Additionally, a settlement could lead to payments of accumulated interest shortfalls for several classes. Hoeltz noted that the loan’s sponsor is still involved in bankruptcy litigation that will not come to trial until next summer.