BarCap moves to save $1.5 bln of UK CMBS from default

(In Aug. 7 story, corrects name of servicing unit throughout to Barclays Capital Mortgage Servicing from BarCap. Also, corrects first paragraph to make clear only part of the CMBS is involved. Inserts detail of the loan tranche in second paragraph. Corrects to say "The borrower" instead of "Indus" throughout, to make clear there is a distinction between the two. Corrects headline to conform with changes to text).

* Borrower puts up 5 more UK properties to correct CMBS breach * Lawyers conducting due diligence on new properties * Servicer Barclays extends cure period to end-Aug

LONDON, Aug 7 (Reuters) - Part of 900 million pounds ($1.5 billion) commercial mortgage-backed securities (CMBS) could be saved from default after the borrower offered to put up more properties to fix a loan-term breach.

A 32.5 million pound loan within the Indus (Eclipse 2007-1) CMBS, secured by 43 UK retail properties leased to Lloyds Bank, are in breach of the loan-to-value (LTV) covenant, the servicer of the bonds, Barclays Capital Mortgage Servicing (BCMS), a unit of Barclays Plc (BARC.L), said on Friday.

The borrower has agreed to provide five additional UK properties as security in a bid to bring the LTV of 107 percent back below the default level of 80 percent, BCMS said in a statement.

"These properties are a mixture of UK high street retail and also residential investment assets, and based on the draft valuation reports ... will be sufficient to fully correct the current LTV breach," BCMS said.

Barclays Bank was the originator of the 894.5 million pound Indus CMBS, issued in April 2007 and maturing in January 2020.

Much of the 77 billion euros' ($110.5 billion) worth of CMBS issued in the UK are in danger of breaching loan terms due to falling commercial property values, leaving "special servicers" such as BCMS to unravel these complex instruments. [ID:nLL102663]

The plan to add more properties to one part of the Indus CMBS is seen as one alternative to injecting cash to deleverage the loan, as liquidity is hard to come by.

"While it's unusual to see properties injected to cure a covenant breach, the process of curing covenant breaches is all too standard these days," a source with knowledge of the situation told Reuters.

BCMS said its lawyers are now conducting due diligence on the new security assets and it has agreed to extend the existing LTV cure period to the end of August from August 5, to allow time for legal formalities to be completed.

(Reporting by Daryl Loo and Tom Freke; Editing by Andrew Macdonald)

($1=.5966 Pound)

($1=.6966 Euro) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)