Tranche Warfare is back! This will have ripple effects in the Capital Markets! CRED iQ recently wrote about 1740 Broadway, "Special servicing workout fees, servicer advances, and other expenses totaled $62.3 million, which left only $117.2 million of net proceeds available to the Class-A investors, which had an unpaid principal balance of $157.5 million. This resulted in a $40.3 million loss (25.6% loss severity) to the A tranche and wiped out all subordinate tranches." "Despite common market knowledge of the degradation of value, 7% occupancy, and the unwillingness of Blackstone to invest in the stabilization of the building, the rating agencies maintained lofty ratings as recently as November 2023," CRED iQ said. One rating agency "had a high 'A' rating" while a second one "had a "BB+" rating for the safest Class A bonds, which were originally rated AAA." Investors in the AAA tranche of the $308 million debt backed by 1740 Broadway in midtown Manhattan recently only got 74% of their investment back after the loan sold at a steep discount. Creditors in the five lower groups were wiped out. https://lnkd.in/eTM9NKxK