Securitisation 2025

Definitive global law guides offering comparative analysis from top-ranked lawyers

CHAMBERS GLOBAL PRACTICE GUIDES

Securitisation 2025

Definitive global law guides offering comparative analysis from top-ranked lawyers

Contributing Editor Tamara Box Reed Smith

Global Practice Guides

Securitisation

Contributing Editor Tamara Box Reed Smith

2025

Chambers Global Practice Guides For more than 20 years, Chambers Global Guides have ranked lawyers and law firms across the world. Chambers now offer clients a new series of Global Practice Guides, which contain practical guidance on doing legal business in key jurisdictions. We use our knowledge of the world’s best lawyers to select leading law firms in each jurisdiction to write the ‘Law & Practice’ sections. In addition, the ‘Trends & Developments’ sections analyse trends and developments in local legal markets. Disclaimer: The information in this guide is provided for general reference only, not as specific legal advice. Views expressed by the authors are not necessarily the views of the law firms in which they practise. For specific legal advice, a lawyer should be consulted.

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Published by Chambers and Partners 165 Fleet Street London EC4A 2AE Tel +44 20 7606 8844 Fax +44 20 7831 5662 Web www.chambers.com

Contents

INTRODUCTION Contributed by Tamara Box and Sarah Caldwell, Reed Smith p.5

JAPAN Law and Practice p.188 Contributed by Anderson Mori & Tomotsune Trends and Developments p.213 Contributed by Atsumi & Sakai LUXEMBOURG Law and Practice p.221 Contributed by Loyens & Loeff Luxembourg S.à r.l.

CAYMAN ISLANDS Law and Practice p.11 Contributed by Travers Thorp Alberga CHINA Law and Practice p.31 Contributed by Zhong Lun Law Firm

Trends and Developments p.245 Contributed by GSK Stockmann SA

CYPRUS Law and Practice p.62 Contributed by Koushos Korfiotis Papacharalambous LLC

MALAYSIA Law and Practice p.252

Contributed by Adnan Sundra & Low Trends and Developments p.270 Contributed by Adnan Sundra & Low NETHERLANDS Law and Practice p.275 Contributed by Freshfields LLP NEW ZEALAND Law and Practice p.294 Contributed by Russell McVeagh

FINLAND Law and Practice p.78 Contributed by Waselius Trends and Developments p.93 Contributed by Waselius GHANA Law and Practice p.99 Contributed by B&P Associates Trends and Developments p.118 Contributed by B&P Associates GREECE Law and Practice p.124 Contributed by Sardelas Petsa Law Firm Trends and Developments p.150 Contributed by Sardelas Petsa Law Firm

NORWAY Law and Practice p.312 Contributed by BAHR

PERU Trends and Developments p.324 Contributed by Rubio Leguía Normand

PORTUGAL Law and Practice p.330 Contributed by VdA

HONG KONG Law and Practice p.155 Contributed by Mayer Brown

SINGAPORE Law and Practice p.354 Contributed by Rajah & Tann Singapore LLP

IRELAND Trends and Developments p.179 Contributed by Matheson LLP

SPAIN Law and Practice p.371 Contributed by Cuatrecasas

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Contents

SWEDEN Law and Practice p.393 Contributed by Advokatfirman Vinge KB Trends and Developments p.412 Contributed by Advokatfirman Vinge KB

SWITZERLAND Law and Practice p.417

Contributed by Walder Wyss Ltd Trends and Developments p.431 Contributed by Walder Wyss Ltd UK Law and Practice p.437 Contributed by Slaughter and May

UAE Trends and Developments p.456 Contributed by Curtis, Mallet-Prevost, Colt & Mosle LLP

USA Law and Practice p.463 Contributed by A&O Shearman

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INTRODUCTION Contributed by: Tamara Box and Sarah Caldwell, Reed Smith

Reed Smith has a team of over 3,000 people, including more than 1,700 lawyers, operating across 31 offices in the US, Europe, the Mid - dle East and Asia. The firm’s global structured finance team has over 55 skilled, experienced lawyers committed to building long-term re - lationships to support clients’ business. Reed Smith has one of the broadest and most dy - namic structured finance teams in the industry. The firm believes that the practice of law has the power to drive progress. Clients’ time is

valuable and their matters are important. Reed Smith focuses on outcomes, with a highly col - laborative approach, and has deep industry insight that, when coupled with the firm’s lo - cal market knowledge, allows it to anticipate and address its clients’ needs. Clients deserve purposeful, highly engaged client service, and the firm’s commitment to building strong rela - tionships helps each client achieve their goals. Reed Smith is ranked in Chambers UK 2025 as a leading firm.

Contributing Editors

Co-Author

Tamara Box leads the structured finance team at Reed Smith. She is the immediately preceding managing partner, EME, and spent almost a decade on the global board of the firm, stepping down from both roles in July 2023. Tamara has twice been named by Financial News as one of the “50 Most Influential Lawyers” in the UK (2022 and 2023), been included in the Global HERoes Women Role Model List every year since its inception in 2016, and was named Law Firm Leader of the Year – Large Law Firm at the Women and Diversity in Law Awards, 2023. She is “top ranked” in Chambers UK 2024.

Sarah Caldwell is a partner in Reed Smith’s structured finance

team, and is recognised for providing strategic advice to financial institutions on structured finance products. Sarah’s practice focuses on high-value, cross-border trades, including securitisations, NPLs, forward flow, receivables financing and India finance work. She sits on the firm’s Women’s Initiative Committee, EME. Sarah has been ranked in Chambers UK for securitisation, and she was included in Brummell’s Ones to Watch listing, which celebrates the brightest 30 under 40 making waves in the City.

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INTRODUCTION Contributed by: Tamara Box and Sarah Caldwell, Reed Smith

Reed Smith 1 Blossom Yard

London E1 6RS Tel: +44 (0)20 3116 3000 Email: tbox@reedsmith.com/slcaldwell@reedsmith.com Web: www.reedsmith.com

Securitisation in 2025: A Year of Opportunities and Challenges Across Evolving Markets

ure. Much of this growth also stems from con - sumer loan securitisations, which benefited from early signs of rate stabilisation by the Federal Reserve and easing inflation. The non-agency residential mortgage-backed securities (RMBS) sector also exhibited resilience given investor confidence around stable US housing market fundamentals and low unemployment rates, despite concerns around affordability and high mortgage rates. The RMBS sector in the UK has experienced a similar resurgence, marking a turnaround from the previous year's volatility-driven constraints on issuance. Early 2024 saw spreads tightening and increased origination activity, supported by a more stable interest rate environment. Prime UK RMBS issuance reached approximately GBP15 billion in the first half of 2024, compared to GBP9.5 billion during the same period in 2023. This represents a 58% year-on-year increase. UK issuers have adapted their business mod - els to operate within the bounds of higher but steady rates, focusing on risk management to safeguard credit quality. Originations of fixed- rate mortgage products have grown, requiring careful hedging strategies to manage interest rate risks and overall being a shift that has ulti - mately strengthened the RMBS market’s appeal to investors.

As we look toward 2025, the securitisation mar - ket stands at a critical juncture marked by eco - nomic resilience, regulatory shifts and evolving investor expectations. Throughout 2024, secu - ritisation markets in most major economies, including the United States (US), United King - dom (UK) and Europe, as well as the likes of India and Australia, have shown remarkable adapta - bility amid fluctuating interest rates, inflationary pressures and a strong investor appetite across select asset classes. This introduction provides a snapshot of the securitisation trends shaping the industry, covering issuance volumes, delin - quency concerns and regulatory updates across a range of jurisdictions. Issuance Trends In 2024, the US remained the largest securitisa - tion market globally, with robust issuance across asset-backed securities (ABS) and mortgage- backed securities (MBS) despite the continu - ing volatile rate environment. The first quarter of 2024 saw a surge in ABS issuance, reaching USD85.6 billion, a substantial 30.5% increase from Q1 2023. By October 2024, the total issu - ance surpassed USD300 billion for the first time, with auto ABS comprising 49.8% of the total fig -

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INTRODUCTION Contributed by: Tamara Box and Sarah Caldwell, Reed Smith

In Europe, collateralised loan obligations (CLOs) surged, with the market on track to surpass 2021’s record of EUR39 billion in issuance. This high volume reflects robust demand and spread compression in investment-grade tranches, highlighting a renewed investor appetite for CLOs across both core European economies and emerging market segments. The synthetic securitisation sector in Europe, primarily focused on transferring corporate loan risk in the bal - ance sheets of French and German banks, saw consistent growth due to favourable regulatory adjustments that reduced capital charges for banks issuing these securities. Australia’s securitisation market experienced unprecedented growth in 2024, with issuances exceeding full-year 2023 levels by the third quar - ter (full-year 2023 issuances being approximately AUD35 billion, and Q3 2024 issuances surpass - ing AUD37 billion). This record-setting pace has been fuelled by substantial foreign investment, particularly in mezzanine tranches, reflecting an increased appetite for Australian RMBS and ABS products. The Australian market’s diversification into non-mortgage ABS, such as asset-backed securities linked to personal loans, has added depth to the sector and is likely to continue into 2025 as investors seek high-yield opportunities amid favourable macro-economic conditions. The securitisation market in India remains on a strong growth trajectory, driven by high demand for infrastructure financing in urbanising regions. Public-private partnerships and regulatory poli - cies geared towards infrastructure investment have attracted capital to transportation and energy projects, which in turn support secu - ritisation volume growth. India’s focus on infra - structure securitisation within the Asia-Pacific region notably aligns with broader trends, with a

10% compound annual growth rate anticipated through 2025. As for Latin America, Brazil takes the lead in securitisation issuance, accounting for over 80% of the volume for 2024. Predictions of market- wide issuance in Latin America now forecast a record high of approximately USD29.4 billion in 2024, with demand largely driven by local inves - tors and supported by government-backed pro - grammes encouraging funding for infrastructure and consumer credit. Emerging economies are also increasingly tapping into sustainable secu - ritisation to attract foreign capital, particularly in green projects. Financial inclusion initiatives, such as microfinance securitisations in India and Kenya, are another significant trend, with local banks and non-banking financial institutions looking to structured finance solutions to fund small businesses and low-income borrowers. As regulatory frameworks evolve, securitisation may become a vital instrument for financing sus - tainable development, addressing funding gaps and spurring economic growth. Interest Rates, Inflation and Delinquency Interest rates and inflation have had a significant impact on the securitisation markets. In 2024, central banks across major economies, includ - ing the US Federal Reserve, the Bank of England and the European Central Bank (ECB), grappled with rate hikes designed to control inflation. These rate hikes significantly influenced the refinancing landscape and delinquency rates, particularly in consumer-focused ABS sectors like auto loans and personal credit. In the US, ABS delinquency rates rose in response to higher borrowing costs, with sub- prime auto loans facing among the highest default rates in a decade. The recommencement of student loan payments, combined with dwin -

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INTRODUCTION Contributed by: Tamara Box and Sarah Caldwell, Reed Smith

dling pandemic-era savings, has strained house - hold budgets, particularly among low-income borrowers. Consequently, investors have exhib - ited increased caution toward lower-rated con - sumer ABS products, gravitating instead toward business-oriented ABS with stronger balance sheet fundamentals. As for UK business, securitised debt instruments have faced higher refinancing costs, with aver - age rates on senior debt increasing from 4.5% to 7.0% over the past two years. These elevated rates have put pressure on cash flow, impact - ing the credit quality of securitised products backed by commercial assets. With corporate delinquencies expected to rise, particularly in sectors sensitive to labour cost increases and energy price volatility, UK issuers are increas - ingly turning to long-term fixed-rate products to mitigate refinancing risks. The European commercial mortgage-backed securities (CMBS) market has also shown signs of distress, notably within the office space seg - ment, where changing work patterns have led to rising vacancy rates and falling rent growth. Although the CMBS issuance volume rebounded in Q3 2024, delinquency rates are anticipated to rise from 4.8% to higher single digits as loans mature, potentially impacting investor sentiment in 2025. However, niche sectors like single-fam - ily rentals remain attractive, as high mortgage rates make renting a more affordable option for many households. Australia’s securitisation market has benefited from relatively low delinquency rates, supported by low unemployment and a tight rental market. Prime RMBS issuance saw an uptick of approxi - mately 50% in Q3 2024, underlining the stabil - ity of the Australian housing sector amid global economic uncertainty. However, Australian issu -

ers remain vigilant about inflation’s impact on household spending and market participants are watching carefully for any signs of consumer credit deterioration. Regulatory Developments The securitisation regulatory landscape in 2024 has seen substantial changes across the US, the UK and the EU, with common themes focused on enhancing transparency, ESG integration and managing capital requirements. These regulato - ry updates are shaping the securitisation market by influencing investor confidence, guiding issu - ance strategies and addressing cross-jurisdic - tional challenges. Enhanced transparency and disclosure requirements In November 2024, both the UK Financial Con - duct Authority (FCA) and the EU implemented new transparency rules aimed at increasing disclosure obligations for securitisation issuers. These requirements mandate detailed pre-trans - action and post-issuance reporting, particularly for ESG-labelled products. The EU’s renewed focus on ESG securitisation is part of its Capital Markets Union (CMU) initiative, which seeks to attract green investment to fuel Europe’s green and digital transition. Risk retention and ESG integration The upcoming Basel III standards, effective January 2025, introduce temporary adjustments that reduce capital requirements on ESG-linked securitisation assets, which will allow banks to allocate more capital to sustainable projects without compromising on regulatory thresholds. However, securitisation issuance in green and ESG-focused products remains modest, reflect - ing the nascent stage of these asset classes and investor caution regarding standardisation gaps across jurisdictions.

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INTRODUCTION Contributed by: Tamara Box and Sarah Caldwell, Reed Smith

Cross-jurisdictional challenges and divergence

synthetic transactions in the EU’s Simple, Trans - parent, Standardised (STS) framework incentiv - ises issuance by reducing regulatory burdens on eligible assets. This trend is likely to gain momentum as Basel III requirements come into full force, driving demand for synthetic securiti - sation as a risk management tool across Euro - pean markets. ESG securitisation Investor interest in ESG-labelled securitisation products has grown, particularly in Europe, where policymakers continue to advocate for sustainable financing. The European Central Bank’s (ECB) first interest rate cut in June 2024 has provided further impetus for ESG invest - ment, particularly in green RMBS and auto ABS linked to electric vehicles. Europe’s securitisation sector could see substantial growth if regulatory incentives and standardisation measures accel - erate, with potential issuance in green finance projected to exceed EUR300 billion annually by 2030. Infrastructure securitisation in Asia-Pacific Rapid urbanisation and regulatory incentives in India and other Asia-Pacific markets are driving demand for infrastructure securitisation, particu - larly in sectors such as transportation and ener - gy. India’s infrastructure-focused securitisation growth aligns with broader economic develop - ment goals, supported by public-private part - nerships and investment-friendly policies. As the securitisation market in Asia-Pacific continues to mature, infrastructure securitisation is expected to become a critical financing tool for regional growth. Conclusion: Securitisation Outlook for 2025 and Beyond The securitisation market in 2025 will be shaped by an intricate interplay of economic, regula -

The disparity in securitisation regulatory frame - works between the US and EU continues to present operational challenges, especially for cross-border transactions. For instance, US government-backed entities such as Fannie Mae and Freddie Mac play a crucial role in supporting the MBS market, providing significant liquidity to US mortgage securitisations. By contrast, the EU relies on private sector securitisations, with the European Investment Fund (EIF) offering only limited public guarantees. This structural differ - ence impacts investor participation and places the EU at a competitive disadvantage in terms of liquidity and market size. These regulatory developments underscore the securitisation market’s need for balance between growth and compliance. As new rules take effect, regulators are aiming to foster mar - ket stability, enhance investor protection and promote capital allocation toward environmen - tally and socially responsible projects. Nonethe - less, diverging approaches between major juris - dictions continue to complicate cross-border issuance strategies, particularly as securitisation participants await potential post-election shifts in US, UK and Indian regulatory policies. Opportunities and Emerging Themes for 2025 As securitisation markets navigate complex reg - ulatory landscapes and macro-economic shifts, several emerging themes are poised to shape

2025 issuance trends. Synthetic securitisation

Europe’s synthetic securitisation market, espe - cially in France and Germany, has seen substan - tial activity as banks increasingly utilise synthetic products to manage balance sheet risk and meet stricter capital requirements. The inclusion of

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INTRODUCTION Contributed by: Tamara Box and Sarah Caldwell, Reed Smith

Guide Introduction As economic pressures and investor expecta - tions reshape the securitisation landscape, the 2025 Chambers Securitisation Guide equips practitioners with essential insights into today’s transactions, including the structuring process, jurisdictional nuances and regulatory frame - works. The Guide offers practical overviews of secu - ritisation transactions across many jurisdic - tions. Each jurisdiction section details com - monly securitised assets, transaction structures and popular regions for special purpose enti - ties. Key documentation requirements, includ - ing asset transfers, covenants, warranties and credit enhancements, are also addressed. The Guide is intended to be accessible and practical, walking the reader through the cycle of a typical securitisation transaction, with a focus on all of the “need to know” transaction features. The Guide includes updated guidance on struc - tural features driven by regulatory developments affecting credit risk retention, transparency, investor disclosure standards and reporting requirements, together with tax and accounting rules that affect asset transfers, profits and the approach on legal opinions. Prepared by secu - ritisation experts, the Guide serves as a useful resource, offering practical support for securiti - sation transactions across different jurisdictions. We welcome comments and feedback for future editions as the securitisation landscape contin - ues to evolve.

tory and structural factors. Stabilising interest rates, cautious investor optimism and regulatory developments aimed at supporting ESG integra - tion and transparency are key trends expected to influence market activity. However, the diver - gent regulatory approaches across the US, UK and EU present ongoing challenges for cross- border securitisations, particularly in terms of compliance and investor protections. As we head into 2025, elections in the US, UK and India are poised to influence economic poli - cy and potentially shift regulatory priorities in the securitisation markets. The outcomes of these elections could affect interest rate trajectories, fiscal policies and ESG-related regulations, impacting both investor sentiment and issuance volumes. Coupled with global efforts to stabilise inflation and ease cost-of-living pressures, these developments set the stage for a securitisation market that must remain adaptable, resilient and responsive to a world in transition. With markets ever evolving, securitisation will continue to be a dynamic financing tool, offering issuers opportunities to optimise balance sheets and investors access to diversified, structured credit products. The success of securitisation in the coming year will likely hinge on market par - ticipants’ ability to navigate regulatory complex - ity, manage delinquency risks in consumer and corporate sectors and harness opportunities in ESG, synthetic and infrastructure-linked asset classes. With the potential for further rate cuts and policy shifts in major jurisdictions, securiti - sation remains a vital tool for financing the global economy’s ongoing transformation.

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters Travers Thorp Alberga

Cuba

Cayman Islands

Jamaica

Contents 1. Specific Financial Asset Types p.15 1.1 Common Financial Assets p.15 1.2 Structures Relating to Financial Assets p.16 1.3 Applicable Laws and Regulations p.18 1.4 Special Purpose Entity (SPE) Jurisdiction p.19 1.5 Material Forms of Credit Enhancement p.20 2. Roles and Responsibilities of the Parties p.20 2.1 Issuers p.20 2.2 Sponsors p.20 2.3 Originators/Sellers p.20 2.4 Underwriters and Placement Agents p.21

2.5 Servicers p.21 2.6 Investors p.21 2.7 Bond/Note Trustees p.21 2.8 Security Trustees/Agents p.21 3. Documentation p.22 3.1 Bankruptcy-Remote Transfer of Financial Assets p.22 3.2 Principal Warranties p.23 3.3 Principal Perfection Provisions p.24 3.4 Principal Covenants p.24 3.5 Principal Servicing Provisions p.24 3.6 Principal Defaults p.24 3.7 Principal Indemnities p.24 3.8 Bonds/Notes/Securities p.25 3.9 Derivatives p.25 3.10 Offering Memoranda p.25 4. Laws and Regulations Specifically Relating to Securitisation p.26

4.1 Specific Disclosure Laws or Regulations p.26 4.2 General Disclosure Laws or Regulations p.26 4.3 Credit Risk Retention p.26 4.4 Periodic Reporting p.26 4.5 Activities of Rating Agencies p.26 4.6 Treatment of Securitisation in Financial Entities p.27 4.7 Use of Derivatives p.27

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CAYMAN ISLANDS CONTENTS

4.8 Investor Protection p.27 4.9 Banks Securitising Financial Assets p.27 4.10 SPEs or Other Entities p.27 4.11 Activities Avoided by SPEs or Other Securitisation Entities p.27 4.12 Participation of Government-Sponsored Entities p.27 4.13 Entities Investing in Securitisation p.27 4.14 Other Principal Laws and Regulations p.27 5. Synthetic Securitisation p.28 5.1 Synthetic Securitisation Regulation and Structure p.28 6. Structurally Embedded Laws of General Application p.28 6.1 Insolvency Laws p.28 6.2 SPEs p.28 6.3 Transfer of Financial Assets p.29 6.4 Construction of Bankruptcy-Remote Transactions p.29 7.1 Transfer Taxes p.29 7.2 Taxes on Profit p.29 7.3 Withholding Taxes p.29 7.4 Other Taxes p.30 7.5 Obtaining Legal Opinions p.30 8. Accounting Rules and Issues p.30 8.1 Legal Issues With Securitisation Accounting Rules p.30 8.2 Dealing With Legal Issues p.30 6.5 Bankruptcy-Remote SPE p.29 7. Tax Laws and Issues p.29

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

Travers Thorp Alberga is a leading offshore law firm for complex and novel financing structuring across all conventional disciplines. The firm’s highly experienced partners advise in respect of all types of offshore structures, including secu - ritisations, collateralised loan obligation trans - actions, CFOs, SPV financing, hedge funds, pri - vate equity, corporate and partnership vehicles, asset and structured finance transactions, fund- linked structured products, cryptocurrencies, fintech, capital markets and general corporate

and commercial matters. The multi-jurisdiction - al fund finance team advises on complex fund finance products including subscription financ - ing, asset-backed financing (NAV facilities), hy - brid, GP support, preferred equity, secondaries, continuation funds and esoteric hybrid capital structures. The firm comprises around 60 fee earners globally and advises from offices in Grand Cayman, the British Virgin Islands, Lon - don, Hong Kong, Australia and New Zealand.

Authors

Agnes Molnar is a partner in the finance team at Travers Thorp Alberga and a recognised expert in the fund finance space, having advised financial institutions, alternative lenders

Jason Ta is a partner at Travers Thorp Alberga, advising on the complete range of securitisations, structured finance and derivatives transactions across the full

and investment funds across various jurisdictions (USA, UK and Middle East) and on a broad range of complex liquidity products with a focus on securitisations, CFOs, fund- linked structured products, private credit, subscription financing, asset-based financing (NAV facilities and ABFs), preferred equity, secondaries, hybrid, GP support, continuation funds and co-invest facilities. Agnes is qualified as an attorney in the Cayman Islands and Hungary (Dr. iur.) and as a solicitor in England and Wales (non-practising).

spectrum of asset classes and underlyings, including in respect of commercial loans, synthetic exposures, bonds and corporate debt, project cash flows, investment funds, commercial and residential mortgages and catastrophe insurance, life insurance and annuities. Jason specialises in creating customised bankruptcy-remote vehicles (including those utilising golden shares, special shares, and irrevocable proxy mechanisms) to achieve particular regulatory outcomes or for optimising capital treatment. Jason’s career has seen him develop legal technology for a number of transactions which has since become standard. Jason is qualified as an attorney in the Cayman Islands and as a solicitor in England & Wales (non-practising).

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

Authors

Paul Walters is counsel in the finance team at Travers Thorp Alberga, based in the Cayman Islands. Paul has over 12 years of structured finance and debt capital markets experience gained in London and New York, with respect to US collateralised loan obligations, warehouse financings and securitisations. Paul has advised market participants on a broad range of structured credit, securitisation and funds activity and regulatory matters, including regulation of residential mortgage securitisation and EU/UK risk retention issues. Paul is qualified as an attorney in the Cayman Islands, a foreign legal consultant in the State of New York and as a solicitor in England & Wales (non-practising).

Gemma Walters is a senior associate in the regulatory team at Travers Thorp Alberga, based in the Cayman Islands. Gemma’s experience includes advising the UK Treasury with

regard to the UK government’s post-crisis nationalised loan book and the government of a Middle Eastern country with respect to the drafting of its regulated financial services laws. Gemma has advised all counterparties in respect of mortgage and consumer finance issues, including UK- and New York-based alternative investment managers. Gemma has been a frequent contributor to the regulatory textbook, Wurtzburg & Mills: Building Society Law. Gemma is qualified as an attorney in the Cayman Islands and as a solicitor in England & Wales (non-practising).

Travers Thorp Alberga Harbour Place 103 South Church Street

P.O. Box 472 George Town Grand Cayman KY1-1106 Cayman Islands

Tel: +1 345 949 0699 Fax: +1 345 949 8171 Email: pwalters@traversthorpalberga.com Web: traversthorpalberga.com

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

1. Specific Financial Asset Types 1.1 Common Financial Assets This section addresses certain issues of law and practice in respect of bankruptcy-remote, spe - cial-purpose entities incorporated or established under the laws of the Cayman Islands for the purposes of a securitisation transaction (defined below) (each, an “SPE”). Where used in this section, a securitisation trans - action (a “securitisation”) involves the following: • An SPE is typically established as a thinly capitalised, exempted company with limited liability. Establishment of such entities can be effected quickly in the Cayman Islands. The shares of the SPE are held on trust by a share trustee (which holds a trust licence in the Cayman Islands), often for charitable pur - poses to achieve an orphan structure (defined below). • An orphan structure, intended to ensure that the SPE (i) does not constitute an affiliate or subsidiary of any other entity, in particular, the entity responsible for the transfer of the receivables to the SPE (the “transferor”) and (ii) should not be regarded as an entity which is otherwise controlled by the transferor from a legal, economic or accounting perspective (an “orphan structure”). Several structural fea - tures are incorporated into a securitisation in order to achieve an orphan structure. See 1.2 Structures Relating to Financial Assets . • The offer, issue and sale by the SPE of debt securities to regulated, institutional inves - tors. Such debt securities are often listed on the Cayman Islands Stock Exchange and assigned a credit rating (“debt securities”). • In securitisations a “true sale” gener - ally involves the assignment of legal and/ or beneficial title by a transferor to the SPE

of the right to receive payments gener - ated by an underlying portfolio of typically largely homogenous assets (such cash flows received in respect thereof are referred to herein as “receivables”). The intent of the true sale is that, after the closing date of the securitisation, the transferor does not have any ownership interest in the receivables that could form a part of the insolvent estate of the transferor (such transfers are referred to herein as a “true sale”). The SPE funds the purchase of the receivables using the net pro - ceeds of the issuance of the debt securities. The analysis of what constitutes a true sale is fact specific. See 1.2 Structures Relating to Financial Assets . • Immediately upon the completion of the true sale, the SPE grants security over all of its assets to a security trustee in favour of the applicable transaction parties, debt securities holders and/or investors of the SPE, in order to secure the SPE’s payment obligations to such parties (the “secured parties”). See 2.8 Security Trustees/Agents . • “Bankruptcy-remoteness” protections, intended to provide that the SPE is remote and protected from the bankruptcy or insol - vency of the transferor. Bankruptcy remote - ness seeks to provide that neither the bank - rupt or insolvent transferor, nor the creditors of the transferor, would be able to either set aside, or successfully apply to a court to have set aside, the true sale of the assets to the SPE. See 1.2 Structures Relating to Finan- cial Assets and 3.1 Bankruptcy-Remote Transfer of Financial Assets . Traditional Asset Classes Almost all financial assets that generate a pre - dictable revenue stream arising from retail or corporate assets located in the USA, UK and EU are commonly securitised, including vehi -

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

cle financing and leasing arrangements, cash flows arising from the operations of a corporate or entire group (whole business securitisation), commercial and residential mortgages, broadly syndicated loans and middle market loans made

tion counterparty will undertake contractually not to engage in, or petition for, the winding up or insolvency of the SPE. Orphan Structure Several structural features supporting orphan structure analysis are typically included in secu - ritisations, including the following: • First, the appointment of the directors of the SPE may be effected by the SPE’s Cayman Islands corporate services provider or admin - istrator, as opposed to the transferor or its advisers. • Second, the shareholder of the SPE will often be a Cayman Islands-domiciled share trustee. The shares are commonly held on trust for charitable purposes. Neither the transferor nor any member of its corporate group should be appointed as a shareholder or director of the SPE. • Third, the SPE will have independent Cay - man Islands legal counsel appointed by the directors of the SPE. The Cayman Islands are home to many reputable law firms that provide such independent advice. • Fourth, the assets, proceeds generated from the receivables of the SPE and monies belonging to the SPE, are held separately from the assets and monies of the transferor, with a view to minimising commingling risk. • Fifth, evidence of arm’s length negotiation, and incorporation of commercially reason - able terms into the securitisation transaction documentation are important from a Cayman Islands perspective. For example, overcol - lateralisation should be kept within a reason - able, commercial level and proper considera - tion should be given (and paid) in respect of the sale of the receivables. The applicable corporate resolutions of the SPE often include

to commercial borrowers. Alternative Asset Classes

Increasingly, entities are established in the Cay - man Islands to provide funding with respect to the ongoing risk retention requirements of origi - nators, sponsors, original lenders and servicers pursuant to the EU/UK securitisation regulations. There has also been an increase in the usage of derivative instruments (total return swaps and credit default swaps) within the context of risk retention requirements. Income, or other proceeds generated by Cayman Islands-domiciled funds, are commonly securi - tised in collateralised fund obligation transac - tions (CFOs). Such structures are increasingly common given the growth of the private credit markets in recent years. A CFO typically involves securitisation of private fund interests (such as limited partnership inter - ests) and other liquid assets or income proceeds. The debt securities are backed by the payment stream received from the underlying fund assets. The CFO issuer is structured as an SPE including typical bankruptcy-remote features. 1.2 Structures Relating to Financial Assets A securitisation will typically include the material

features outlined below. Bankruptcy Remoteness

The SPE is intended to be treated as an entity remote from the transferor and unaffected by the insolvency of the transferor. Each transac -

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

Grant of Security Immediately upon the transfer or assignment to the SPE of the receivables, a security grant will be made in favour of a security trustee for the benefit of the secured parties. Tax There is no concept of tax residency under the laws of the Cayman Islands, rather, the applica - ble onshore regimes do not claim a tax nexus or base if implemented correctly. There is cur - rently no income, corporation or capital gains tax charged in the Cayman Islands. See 7. Tax Laws and Issues . Foreign Account Tax Compliance Act (FATCA) The Cayman Islands Tax Information Author - ity Act (International Tax Compliance) (United States of America) Regulations (2021 Revision) was implemented in furtherance of the intergov - ernmental agreement between the United States and the Cayman Islands and requires financial institutions to report US tax resident account - holders to the Cayman Islands Tax Information Authority, which will pass such information to the US IRS. As a result, the SPE should generally not be subject to withholding tax on payments made to the SPE. Common Reporting Standard The Cayman Islands has implemented the Organisation for Economic Co-operation and Development (OECD) Standard for Automatic Exchange of Financial Account Information (commonly known as the Common Reporting Standard (CRS)) through the Tax Information Authority (International Tax Compliance) (Com - mon Reporting Standard) Regulations (2021 Revision).

analysis of the corporate benefit to the SPE of it entering into the securitisation. Limited Recourse The transaction documents will provide that the secured parties must rely solely on the cash flows generated by the receivables (and in cer - tain circumstances following an event of default, proceeds from the liquidation of the underlying assets) in order for the SPE to meet its payment obligations to the secured parties. If distributions on the assets are insufficient to make payments to the secured parties, no other assets will be available for the shortfall and, following liquida - tion of the assets, the liability of the SPE to pay any such shortfall will be extinguished. Issuance of Debt Securities and Waterfalls The transaction parties will agree the order and frequency of distributions paid by the SPE, both in normal course and in an enforcement situation (such priorities of payment, the “waterfalls”). The laws of the Cayman Islands recognise both contractual and structural subordination and the Companies Act (defined below) specifically pro - vides that an otherwise enforceable agreement to contractually subordinate claims shall be recognised in a liquidation of a Cayman Islands company. There will typically be no intention to accumu - late any surplus in the SPE (other than amounts standing to the credit of a general reserve or liquidity fund). Receivables On the closing date of the securitisation, title to the receivables and their related security are transferred to the SPE. The initial purchase price is funded using the net proceeds of the issuance of the debt securities of the SPE.

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

Registered Office Provider As a matter of the laws of the Cayman Islands, the only requisite Cayman Islands-based admin - istrative provider is a registered office provider. However, for tax and other reasons, the SPE will typically appoint Cayman Islands-domiciled cor - porate service providers and/or administrators to provide directorships, legal, regulatory and compliance assistance. 1.3 Applicable Laws and Regulations The principal laws and regulations of the Cay - man Islands that impact the majority of secu - ritisations can broadly be divided into two cat - egories: • laws in respect of the establishment and incorporation of SPEs; and • laws in respect of ongoing compliance. Establishment and Incorporation of SPEs The Companies Act (2023 Revision), as amend - ed, of the Cayman Islands (the “Companies Act”) is likely to be the most relevant instrument for most SPEs. Ongoing Compliance One or more of the following laws and regula - tions (as amended, in each case) are likely to be relevant: • Anti-Money Laundering Regulations (2023 Revision) (together with the Guidance Notes on the Prevention and Detection of Money Laundering, Terrorist Financing and Prolifera - tion Financing in the Cayman Islands (the “Guidance Notes”)) (AMLRs); • Beneficial Ownership Transparency Act, 2023; • Beneficial Ownership Transparency Regula - tions, 2024; • Data Protection Act (2021 Revision);

• Proceeds of Crime Act (2024 Revision) (the “POCA”); • Tax Information Authority (International Tax Compliance) (United States of America) Regulations; and • Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations (2021 Revision). All Cayman Islands persons (which will include an SPE) are required to observe Cayman Islands sanctions provisions. The list of sanctions regimes currently in force in the Cayman Islands is available on the Financial Reporting Authority website. The listing rules of the CSX (including applicable disclosure requirements) will apply if the debt securities are listed on the CSX. See 3.8 Bonds/ Notes/Securities . All Cayman Islands persons (which will include an SPE) are required to file electronically with the Registrar of Companies a notification regarding their status under the International Tax Coopera - tion (Economic Substance) Act (the “ES Act”). Relevant entities engaged in relevant activities are also required to satisfy the economic sub - stance test under the ES Act and to file an annu - al report with the Cayman Islands Tax Informa - tion Authority concerning compliance with the economic substance test. A securitisation SPE is likely to fall within the definition of an “invest - ment fund” under the ES Act, which means it will not be a relevant entity, and will not there- fore have to satisfy the economic substance test under the ES Act. As a matter of the laws of the Cayman Islands, an SPE is unlikely to be registerable under the Mutual Funds Act or the Private Funds Act.

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

Quoted Eurobond Exemption – CSX The quoted Eurobond exemption is an exemp - tion from the obligation to withhold income tax from certain (UK) source payments. In order to qualify for the quoted eurobond exemption, the debt must, among other things, be listed on a recognised stock exchange. Since March 2004, the Official List of the CSX has been a “recog - nised stock exchange” by His Majesty’s Revenue & Customs. Typically, SPEs involving UK-source payments take advantage of this exemption and list debt securities on the CSX. Debt securities can be efficiently and promptly listed on the CSX given the CSX’s familiarity with securitisation structures. The CSX is an affiliate member of the International Organization of Securities Commissions. The CSX has a listed market value in excess of USD884 billion. Mitigation of Counterparty Risk and Availability of Service Providers The focus in the Cayman Islands on financial services means that there are a wide range of well-staffed, high-quality law firms, accountan - cy firms, insurance companies, banks and both captive and third-party service providers able to provide professional advice and services to both Cayman Islands-domiciled special purpose enti - ties and their sponsors and advisers. Market participants can mitigate their own inter - nal counterparty risk by engaging and instruct - ing different service providers across transac - tions and product groups. Tax Neutrality See 7. Tax Laws and Issues .

In respect of a CFO transaction involving either receivables governed by the laws of the Cayman Islands or equity interests of Cayman Islands funds, the true sale and asset transfer analy- sis may require consideration of the Exempted Limited Partnership Act (2021 Revision) and the Limited Liability Companies Act (2023 Revision), each as amended. In the case of a securitisation involving an orphan trust established in the Cay - man Islands, the Trusts Act (2021 Revision), as There are a number of reasons why the Cayman Islands are attractive in the context of incorpo - rating special purpose entities. Flexible and Well-Established Legal System The sophisticated and well-established common law legal system in the Cayman Islands has been used extensively for the establishment of SPEs for securitisations. amended, will likely be applicable. 1.4 Special Purpose Entity (SPE) Jurisdiction The Cayman Islands has its own company, trust, partnership and related laws that allow a high degree of flexibility for establishing special pur - pose entities, invariably driven by user inputs. Because of their structure, securitisation special purpose entities that are not insurance securiti - sation vehicles are generally not required to be registered or licensed by the Cayman Islands Monetary Authority (CIMA) under any regulatory law. The Cayman Islands are seen as a creditor- friendly jurisdiction, with no Chapter 11 or equivalent procedures that might frustrate the enforcement of security arrangements.

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

2. Roles and Responsibilities of the Parties 2.1 Issuers See 1.1 Common Financial Assets and 6.2 SPEs . 2.2 Sponsors Role of the Sponsor The role and meaning of the term “sponsor” varies across jurisdictions. There is no statu - tory definition of such term under the laws of the Cayman Islands with respect to a securitisa - tion. The sponsor would usually be understood to be the party who initiates the securitisation In many cases, the SPE and sponsor may enter into an agreement pursuant to which the transferor or sponsor will reimburse the SPE in respect of certain obligations of the SPE to make payment of certain transaction fees, expenses and payments under any indemnities provided by the SPE (a “reimbursement agreement”). 2.3 Originators/Sellers and appoints service providers. Reimbursement Agreements There is no statutory definition of “originator” or “seller” under the laws of the Cayman Islands with respect to a securitisation SPE. • Originator: The “originator” would usually be understood to be the party who initially cre - ated legal and equitable title in the underlying assets. • Seller: The “seller”, in the context of a secu - ritisation, is the transferor (transferring current or future rights over, or in respect of, the receivables) from whom an SPE acquires (or would in the future have the right or an obli - gation to acquire) title to the receivables.

1.5 Material Forms of Credit Enhancement

SPEs are able, under the laws of the Cayman Islands, to enter into securitisations, which include typical forms of credit enhancement, the most common forms being: • Tranching of Credit Risk: Tranching involves contractual subordination of the rights of each secured party to receive payment. The highest-ranking class of debt securities will rank pari passu and rateably without any preference or priority among themselves as to payments of interest and principal. Each other class of debt securities will be subordinated in payment to each higher-ranking class. Pursuant to the waterfalls, no payments will be made on any class of debt securities until amounts due on each higher-ranking class have been paid in full. • Over-Collateralisation: The assets of the SPE may be required to exceed the aggregate amount outstanding under its debt securities by a specified percentage. • Excess Spread: Additional revenue may be generated by the difference between the interest payable on the underlying assets (such as a mortgage interest rate) and the interest payable on the debt securities. • Reserve Funds: A general reserve fund is typically established by the SPE from the proceeds of the issuance of the debt securi - ties (up to a required amount). Typically, such amounts may be invested by or on behalf of the SPE in authorised investments. A liquid - ity reserve fund may also be established by the SPE on the closing date (up to a required amount) in order to provide the SPE with increased liquidity.

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CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga

2.7 Bond/Note Trustees Bond/note trustees are appointed by the SPE in respect of the grant of security over its assets. A bond/note trustee acts on behalf of the hold - ers of the debt securities, and whilst any debt securities remain outstanding, the bond/note trustee will not be required to have regard to the interests of the other secured parties. SPEs may hold legal and/or equitable title to assets located in the Cayman Islands or anoth - er jurisdiction with little or no specific custody arrangements mandated by the laws of the Cay - man Islands. 2.8 Security Trustees/Agents Similarly with bond/note trustees, security trus - tees/agents are appointed by the SPE on a trust or agency basis in respect of the grant of secu - rity over its assets. The security trustee/agent holds the portfolio of assets on trust for the ben - efit of the secured parties. As a matter of the laws of the Cayman Islands, the Companies Act requires that a limited com - pany maintain a statutory register of mortgag - es and charges recording all security interests affecting the property of the company, plus a short description of the charged property, the amount of the charge and the persons entitled to such charge. Set out below are some material considerations with respect to security governed by the laws of

The seller and the originator are not necessarily the same entity. 2.4 Underwriters and Placement Agents The underwriter or placement agent is usually engaged on behalf of the SPE to act as struc - turer and arranger in connection with a securiti - sation. In a transaction where the underlying assets are subject to discretionary management, the SPE will appoint an asset manager. Certain manage - ment, advisory and administrative functions with respect to the assets will be performed by the asset manager, including managing the selec - tion, acquisition, reinvestment and disposition of the assets. Servicer In transactions involving a static portfolio of assets, an asset servicer is appointed. The role of the servicer is to maximise the value of assets and recoveries for the secured parties, as well as to maintain regulatory compliance. Back-up servicers may be appointed to mitigate the risk of default or insolvency of the existing servicer. 2.6 Investors Outside of the scope of applicable sanctions laws and regulations, there are few restrictions on the types or number of entities that can invest in an SPE. 2.5 Servicers Asset Manager No invitation (whether directly or indirectly) may be made to the public in the Cayman Islands to subscribe for debt securities issued in a secu - ritisation transaction unless the debt securities are listed on the CSX. See 1.1 Common Financial Assets .

the Cayman Islands. General Principles

As with other common law jurisdictions, the purpose of any security created in favour of a secured party is to recognise that such secured party will be able to look to an asset (or the pro -

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