That trigger was when the most senior tranche in the mortgage loan securitization would be priced at 200 points over the London Interbank Offered Rate, the benchmark interest rate used for a variety of financial instruments, the suit says. Under the terms of the agreement, a "pricing trigger" was set to determine when the market disruption clause could be exercised and the deal terminated.
"Bancorp's insistence that Cascade defraud the market in order to exercise its bargained-for contractual rights was an egregious, objectively unreasonable abuse of its contractual obligations for a singular purpose: to illicitly retain Cascade's multimillion-dollar deposit," Cascade said. In breach of their contract, Bancorp refused to return the deposit, telling Cascade that "actual bids" from investors were needed to prove that the market was too volatile to go through with the securitization deal - a stance that would force a "sham offering process" the bank knew Cascade couldn't accept in good faith, Cascade alleges.
#KYLE ELLIOTT WATERFALL ASSET MANAGEMENT SERIES#
In late February, Cascade Funding LP - Series 6, an affiliate of Waterfall Asset Management LLC, agreed to buy and securitize a pool of $900 million in mortgage loan assets from Bancorp which would then be sold to investors by April 15, the suit says.īut when COVID-19 severely impacted the market in late March, Cascade invoked the market disruption clause in their contract to shut down the deal and get its $12.5 million deposit refunded, according to the complaint. An asset-backed securitizer hit The Bancorp Bank with a suit in New York state court Monday, alleging the bank refused to honor a "market disruption" clause when the coronavirus pandemic and ensuing financial volatility killed their $900 million mortgage loan securitization deal.
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