Securitisation

Definitions: Use of Key Concepts and Terms

• What is “Securitisation”?
• Identifying the primary areas of law involved
• High-level detail of a basic “true sale” structure
• What is a “special purpose vehicle” or (SPV)? How is it used and why?
• Bankruptcy remoteness, good, bad or indifferent
• “Permitted Activities” and why are they relevant
• “Limited Recourse” meaning and use
• “PECOH” – post-enforcement call options holder’
• Non-Petition Orphan Trust Structure
• Basic accounting treatment of SPV (US and UK GAPP)
• Securitisation training explores the key parties involved, a description of key roles and responsibilities

Key Current Relevant Law and Regulation

• The Taxation of Companies Securitisation Regulations 2006 (SI 2006/3296)
• US Securities Act of 1933 Requirements
• Regulation S Offerings (Reg S), Regulation 144A Offerings (144A)
• US 10b-5 Legal Opinions
• s136 Law of Property Act 1925
• Consumer Credit Act 1974 and 2006 (CCA)
• Unfair Contract Terms Act 1977 (UTCA)
• Unfair Terms in Consumer Contracts Regulations 1999, SI 1994/3159 (UTCCR)

Case Law

• ARM Asset Backed Securities S.A. (2013) EWHC 3351 (Ch)
• Van Lynn Development Limited v Pelias Construction Co. (1969) 1 QB 607
• Re Turcan
• Don King Productions Inc. v Warren
• Barbados Trust Company Limited v Bank of Zambia and others.

Key Offshore SPV Jurisdictions

• Old and new, pros and cons and a summary of the main current issues affecting them today

Benefits of Securitisation

• For originators, for investors, the role and importance of tranching, subordination & payment waterfalls

Other Key Elements Identified

• Static vs revolving structures, sale of residual certificates, credit rating process, popular credit and liquidity enhancements, over-collateralisation (what is it and is it always bad?)
• Subordinated tranches; subordinated loans; retained spread (who sets it and how is it used?)
• Liquidity facilities, roles and importance of insurance
• Liquidity support
• Hedging
• Servicing and profit extraction

Types of Securitisation

• Underlying assets due diligence; true sale; synthetic, whole business, auto loans, trade receivables (e.g. invoice discounting and factoring)
• Residential mortgage-backed securitisation (RMBS)
• Commercial Mortgage-Backed Securitisation (CMBS) (historical importance of Fannie Mae and Freddie Mack)
• Covered bonds
• Master trusts - concept of bare trust
• Waterfalls
• Drawdowns

Assignability of Assets

• Novation, assignment, assignation and intimation and notice – not all legal systems are the same
• Silent contract and assignability, legal v equitable assignment (differences, benefits and risks), notices and acknowledgement of Assignment (importance and effects)

Risk Mitigation (Common Types Summarised)

• Trustees and other powers of attorney, warranties (when, how, who and why?)
• Restrictive covenants; charge & control over, receivables accounts, Assignability and other forms of transfer of Foreign Assets, Declaration of Trusts and their role, sub-participation (what is it and why have it?)

Risk Factors

• Security & Priority of Payments, the key documents (highlighted, synthetic securitisation structures, validity & enforceability, regulated contract example: residential mortgage, common confidentiality restrictions and their potential impact
• Asset representations, disclosure requirements & market standard, risk profile of asset pool, legal/structuring risks, credit risk, interest rate risk, currency risk, political risk, regulatory considerations

Security Package

• Standard elements, role and responsibilities of the secured creditors, impact on the priorities of payments and their waterfalls

Events of Default

• Securitisation courses at Redcliffe assess enforcement methods (acceleration and others), common problems with enforcement

Other Key Documents

• Securitisation prospectus or base Prospectus (for programmes), asset sale and purchase agreement, servicing securitisation agreement, deed of charge, cash management agreements, swap agreements, subscription securitisation agreement, common formats of funding instruments (debt or otherwise), note trust deeds, liquidity facility agreements, legal opinions (what should and can be covered and by whom, tax opinion)

Redcliffe's Securitisation training specialist has almost 30 years of direct international experience with in-house and private practice in finance transaction management. He has helped clients in securing their goals and projects while always best mitigating risk and maximising benefit, both commercial and personal. Specific expertise in the asset, project and trade finance sectors; aviation, marine and renewables, gained in London, Hong Kong, Singapore, Indonesia, Japan, Europe and North America.

He is Scots and English law qualified, as well as a previously registered foreign lawyer in Hong Kong and the Isle of Man. He is currently the sole authorised marine legal advisor in the UK for the governments of the Republics of both Kiribati and Tuvalu.

Our trainer is currently working with two new international transportation market entrants, one trans-European passenger rail and the other international passenger aviation, in their initial start-up phase through sourcing initial debt to product design, development and restructuring. He helps clients find, identify, meet and work with key stakeholders necessary to efficiently bring their products to market, and keep them at the top.

The trainer is also a very experienced finance and legal industry trainer working with and/or through established professional trading providers.

Recommended by Legal 500 for in-depth legal and asset sector experience, in asset finance (shipping and aviation), project finance (LNG, oil & gas), structured finance, trade finance and general banking sectors. Direct international experience in both in-house and private practice (magic circle).

He is the author of many marine and aviation industry articles and co-editor of the Aircraft Encumbrances Hong Kong Chapter of Haines & McBain.

Securitisation courses at Redcliffe cover the basics, key definitions and terms, including but not limited to the special purpose vehicle, the credit rating process and profit extraction.

It will introduce, amongst other key elements and concepts:

• Different types of securitisations in current use
• The importance of and various modes of identifying and scoping the necessary due diligence of the underlying assets
• Common key risk factors, including the risk profile of the asset pool and regulatory considerations
• An understanding of the related security that can be possible, and the priority of payment
• The key documents, including, but not limited to, the asset sale and purchase agreements, the deed of charge and the cash management agreement

Included is an update on certain key recent securitisation litigation cases.

• Redcliffe's securitisation training courses contain the most detailed content on the market, including case law, rating issues, and documentation.
• It not only covers the technical legal aspects to be considered when reviewing or drafting legal opinions, but also the structuring aspect, including detailed cash flows.
• The trainer is a subject matter expert and has spent almost 30 years in the securitisation field, in the UK and internationally. This is both private practice and in-house.
• Participants will benefit a great deal from the trainer’s own extensive hands-on experience and personal lessons learnt.
• The trainer is a multi-jurisdictional qualified solicitor with a background in Magic Circle law firms, international retail and investment banks. He has a very wide array of experience and skills earned from working on many and varied complex innovative transactions, as well as more straightforward structured transactions. All across a wide range of commercial sectors (focusing on energy, transport and renewables).
• Learn with our securitisation online course dates or have this delivered in-person to your organisation.

This Securitisation course is essential for:

• In-house legal counsel at all levels
• Private practice lawyers - from paralegals and trainees to associates to partners and heads of departments
• Bankers and structurers - Analysts, Associates, Vice Presidents, Directors and Managing Directors) who typically act as Arrangers, Lead Managers, Security Agents and/or Trustees in securitisation and/or various structured finance transactions
• Transaction management and execution teams engaged in the documentation or administration of securitisations and structured finance transactions
• Senior corporate and banking executives - including CEOs, CFOs and Treasury professionals
• Insurance companies participating in securitisation or structured finance transactions
• Listing agents responsible for listing securitisation prospectuses
• Institutional investors and investment professionals
• Investors such as wealth funds and pension funds in securitisations and/or structured finance deals.

This intensive course offers a comprehensive, practical and legal overview of securitisation and structured finance transactions. It explores the key structural components, documentation, risks, and regulatory frameworks that underpin modern securitisation practices.

Participants will develop a deep understanding of securitisation from legal, commercial, accounting, and risk management perspectives, reinforced by the study of relevant statutes, regulations, and landmark case law.