Consider a CMBS with the following characteristics:

• Backed by $20M mortgages, 7% interest, 5-yr maturity, IO annual payments, no servicer fee
• There are three tranches issued:
  • $13M Tranche A (Senior/Investment Grade CMBS) with coupon rate 5%
  • $7M Tranche B (Junior/ Non-investment Grade CMBS) with coupon rate 6%
  • IO residual tranche (no extra collateral, but collects extra interest)

Now consider a situation where there is a recession in year 5. The SPV / issuer is only able to collect payments and sell the underlying collateral for a total of $18M. In other words, it only has $18M to disburse to its investors in year 5. In this scenario, what is the cash flow to Tranche B in year 5?