NETHERLANDS Law and Practice Contributed by: Mandeep Lotay and Dámaris Engelschman, Freshfields LLP
Furthermore, as already mentioned in 1.2 Struc- tures Relating to Financial Assets , as the SPV is limited in terms of objects and activities, all tasks are outsourced to third parties. A paying agent is appointed to make payments to the specified noteholders of the SPV, an account bank will be mandated to establish one or more transaction accounts for the SPV, the seller (or another spe - cialised entity) will usually function as servicer to the SPV to manage and collect payments on the transferred financial assets and, as mentioned above, a specialised corporate services provider will be appointed to perform the SPV’s admin - istrative tasks, and a cash manager will run the relevant payment waterfalls. 2.2 Sponsors The sponsor is the party that commences the securitisation transaction. The sponsor will usu - ally be either the originator/seller of the finan - cial assets itself or an entity affiliated with the originator/seller. Sponsors can be a financial asset-originating business or an investment firm (commonly, private equity and alternative asset managers) that purchases financial assets for the purpose of achieving an economic return which may in whole or part be through the use of securitisation. 2.3 Originators/Sellers The originator is the entity that creates (or in some cases, the entity that acquires) the finan - cial asset that is being securitised – eg, the lend - er under a mortgage loan or a lessor under an auto lease. There is a wide variety of businesses operated by entities classified as originators, and the line of business of an originator directly correlates to the type of asset that it securitises. Typical originators in the Netherlands are busi - nesses such as mortgage loan providers, banks and companies that offer business and consum -
is financed and maintained by allocating any excess cashflow the securitisation transaction generates from time to time and/or using the proceeds of certain of the debt instruments issued by the SPV, often to the seller/origina - tor of the securitisation transaction. The net effect of this model is that the seller/originator is first liable to make whole such shortfalls and/or losses and, therefore, first suffers any credit losses on the asset portfolio. • Overcollateralisation. This involves secu - ritising a larger notional amount of finan - cial assets than the notional amount of the securitised debt issued or otherwise raised by the SPV. Since there are more assets, and therefore income, supporting the secu - ritised debt, the probability of there being a shortfall (eg, caused by credit losses on the underlying assets) from time to time in the SPV’s income to service the SPV’s securitised debt is reduced. If asset performance is as expected, any excess cashflow generated by the excess assets (or otherwise), is returned by the SPV to the seller/originator in the form of a deferred purchase price. 2. Roles and Responsibilities of the Parties 2.1 Issuers The issuer is the purchaser of the financial assets and issuer (or borrower) of the securitised debt issued or otherwise advanced to investors. The issuer is typically structured to be an orphan with limited objects and activities and bankruptcy remote with a limited group of creditors, each of which agree to limit their recourse to the issuer and ability to petition for the insolvency of the issuer. To further enhance its orphan status, the issuer will have directors appointed from third- party service provider.
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