https://www.fdic.gov/news/conferences/2011-12-15-transcript....
We also have several questions about A and B notes, Bob. And if we could turn to a couple of those. An A and B Note Structure was addressed in the prudent CRE workout guidance. What we talked about in that particular guidance is restructuring a loan so that it has two pieces, a new Loan A and Loan B. It's often thought of as Loan A being the good loan and Loan B being the bad loan.

And then just to follow up, there is another question dealing with the A/B Note structure. This one says, "A loan was split into two notes as part of a TDR. Note A is performing as agreed based on current market terms. Note B with zero interest was charged off, but it wasn't forgiven. The collateral coverage is sufficient for both notes." That kind of leads me to question why the B Note was charged off.

TDR
We're pleased to have a discussion of this important topic and to answer as many questions as possible about the CRE workout guidance and a variety of general accounting issues such as the allowance for loan and lease losses and troubled debt restructurings, which we often refer to as TDRs.

http://files.ali-cle.org/thumbs/datastorage/skoobesruoc/sour...
Elements of the A/B Note Lending Transaction

An A/B note transaction includes the following elements, all of which are addressed in the
Intercreditor and Servicing Agreement:

a. A senior lender (usually a banking institution) originates a secured loan as the “Lender”. The
indebtedness is split into senior and junior pieces, represented after the split by separate notes
defined as Note A and Note B respectively. Both are secured by a single package of collateral
and are referred to collectively as the Loan.
b. Note B is sold by the Lender to a junior lender, called the Co-Lender.
c. Note A is initially retained by the Lender. Usually, the Lender will service the Loan while Note A
is held by the Lender, but the Lender may also engage a Servicer, who may or may not be an
affiliate of the Lender, to have exclusive responsibility for administering Note A.
d. Note A will then be sold by Lender into a CMBS trust. Upon that sale, Note A will become part of
a pool of secured debt qualified for REMIC treatment. The continued qualification of Note A
under REMIC will be essential to the CMBS trust.


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Note added at 4 hrs (2017-05-22 00:08:32 GMT)
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FIRST AMENDMENT TO LOAN AGREEMENT, NOTE SPLITTER AND LOAN MODIFICATION AGREEMENT

THIS FIRST AMENDMENT TO LOAN AGREEMENT, NOTE SPLITTER AND LOAN MODIFICATION AGREEMENT (this “Agreement”), dated as of October 28, 2015, made by and between the Borrowers listed on Schedule I, each having an address at c/o American Realty Capital, 405 Park Avenue, ...

WHEREAS, the Loan is evidenced by that (i) certain Promissory Note A-1 in the original principal amount of $60,000,000, dated as of October 6, 2015, made by Borrowers to Ladder Capital Finance LLC (“Note A-1”), (ii) certain Promissory Note A-2 in the original principal amount of $39,600,000, dated as of October 6, 2015, made by Borrowers to Ladder Capital Finance LLC (“Note A-2”), (iii) certain Promissory Note A-3 in the original principal amount of $39,600,000, dated as of October 6, 2015, made by Borrowers to Ladder Capital Finance LLC (“Note A-3”), (iv) certain Promissory Note A-4 in the original principal amount of $40,000,000, dated as of October 6, 2015, made by Borrowers to GACC (“Note A-4”), (v) certain Promissory Note A-5 in the original principal amount of $26,400,000, dated as of October 6, 2015, made by Borrowers to GACC (“Note A-5”), and (vi) certain Promissory Note A-6 in the original principal amount of $26,400,000, dated as of October 6, 2015, made by Borrowers to GACC (“Note A-6”).

https://www.lawinsider.com/contracts/Z3LgfQ2MbHhQAcLR9unYv/a...