SPAIN Law and Practice Contributed by: Jaime de la Torre and Jaime Juan Rodríguez, Cuatrecasas
SPE shall not be subject to severe claw-back provisions in the event of the seller’s insolvency. 3.2 Principal Warranties Types of Warranties Two sets of representations and warranties (R&W) given by the seller are commonly used in Spanish securitisations. • Representations on the seller – the standard R&W include: (a) the legal form and status of the seller; (b) the absence of insolvency or bankruptcy situations; (c) authorisations and corporate approvals; and (d) audited annual statements for the last two fiscal years. • Representations on the assets – the standard R&W include that the assets: (a) originated in the ordinary course of the seller’s business; (b) are existing, valid and susceptible of be - ing enforced under the applicable laws; and (c) meet all necessary conditions to be trans - ferred to the SPE. Breach of R&W Most of the wording of warranties regarding the breach of an asset representation and warranty is usually structured as a breach of the eligibil - ity criteria, and its contractual enforcement is materialised as a three-step obligation process for the seller: • to remedy the breach; • to replace the affected receivable; and • if these are not possible, to repurchase the affected asset.
Enforcement is made primarily by the manage - ment company, although judicial enforcement is a possibility since these provisions are a con - tractual undertaking under the deed of incorpo - ration of the SPE. 3.3 Principal Perfection Provisions Common Provisions The transfer of assets from the seller to the SPE is instrumented under Spanish law as follows: • assignment transaction – as an assignment ( cesión ) of the receivables derived from the loans; • type of asset – the sale is executed by means of an SPA generally or, in the case of mort - gage loans, through the issuance of multiple titles if the seller is a financial entity; • formalities – the assignment transaction also has to comply with the formalities contained in Article 17 c) of Law 5/2015; and • revolving formalities – in the context of revolv - ing securitisations, the management com - pany should deliver a document executed by the seller to the CNMV for each additional purchase, containing identification of the additional assets and a declaration of compli - ance with the eligibility criteria. Notarisation Considering Articles 1227, 1280 and 1526 of the Civil Code, the documentation usually includes an execution covenant so that the sale agree - ment is notarised in order to be fully effective vis-à-vis third parties. Notification to Borrowers Notification is not a perfection requirement. However, until the borrower is notified of the sale of the loan to the SPE, pursuant to Article 1,198 of the Civil Code, the borrower will be:
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