SWEDEN Law and Practice Contributed by: Albert Wållgren, Henrik Ossborn and Lionardo Ojeda, Advokatfirman Vinge KB
3.4 Principal Covenants In addition to customary positive and negative covenants relating to the ring-fencing of the SPE and the assets and liabilities forming part of the securitisation, Swedish securitisation docu - mentation usually includes certain covenants specific to the securitisation and the Swedish regulatory environment. For example, a com - pany that intends to participate in financing by acquiring receivables and raising financing from financially regulated entities (eg, an issuer in a securitisation) does not need a licence from the Swedish Financial Supervisory Authority (SFSA) to conduct such activities. It does, however, need to register with the SFSA pursuant to the Currency Exchange and Other Financial Opera - tions (Reporting Duty) Act. Once registered, the company will be a so-called financial institution ( finansiellt institut ), which, in accordance with the aforementioned Act, will be subject to certain anti-money laundering and KYC obligations (for example). Until recently, the company could initiate its business as soon as the registration application was submitted to the SFSA. However, the SFSA has recently commu - nicated that, going forward, registration must be completed before the company can start to acquire financial assets. This new develop - ment requires more focus on completing and filing the application for registration early on in the process in order not to create any delays. The securitisation documentation usually con - tains a covenant to retain such registration and a covenant restricting the company from raising financing from non-regulated entities. In addition, depending on the applicable credit enhancement structure and the applicability of the Securitisation Regulation, the securitisation documentation usually contains a covenant to
with agreed eligibility criteria, agreed concentra - tion limits, and applicable laws and regulations. Any breach of warranty would typically constitute an event of default and/or an early amortisation trigger event under the securitisation documen - tation, but any breach of asset-related warran - ties could usually be cured by a repurchase of the affected receivables by the originator within a certain period of time (and sometimes, a breach of asset-related warranties would only result in the affected loans falling out of the borrowing base without triggering an event of default if the borrowing base ratio is still being complied with). 3.3 Principal Perfection Provisions As outlined in 6.3 Transfer of Financial Assets , the necessary perfection provisions depend on whether the receivables are non-negotiable promissory notes ( enkla skuldebrev ) or negotia - ble promissory notes ( löpande skuldebrev ). Gen - erally, the necessary steps include: • notifying the debtor of the transfer; and • in the case of negotiable promissory notes, transferring the physical promissory note to the SPE. In most cases, the secured parties will obtain a pledge over the transferred receivables, under which the security agent, acting on behalf of the secured parties, will obtain a power of attorney authorising it to do all such acts and take any steps necessary to establish, maintain and pre - serve the pledge. There is normally a high level of focus on ensuring that all relevant perfection steps are taken, and such perfection steps are typically conditions precedent to funding (both on the initial utilisation date and on future utilisa- tion dates).
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