CMBS Balloon Payment Provision

Text says that if borrower is delinquent on a CMBS underlying loan and the lender is willing to extend the loan, balloon payment risk may be equal to all tranches because all loans must be refinanced to pay off the senior bondholders.

Can someone provide clarifications on why senior bondholders (i.e. AAA rated tranche) have the same balloon payment risk as junior bondholders (i.e. B rated) when structuring refinancing, seniors are favored?

I think the key word is ‘may’ as you state in your original post. if the balloon payment cannot be made then no one gets their principal, hence the risk is equal to all tranches. CMBS dont amortize principal so if not a penny of it can be repaid then it needs to be refinanced, affecting all tranches equally.

if partial principal can be repaid then the lower tranches would take the hit, and the seniors are protected. This would be my logical answer without checking the text for accuracy.

Makes sense. Thank you very much.