SWEDEN Law and Practice Contributed by: Albert Wållgren, Henrik Ossborn and Lionardo Ojeda, Advokatfirman Vinge KB
Financial Assets and 3.1 Bankruptcy-Remote Transfer of Financial Assets , it is fundamental for the issuer to be able to terminate the appoint - ment of the servicer, at any time and at its sole discretion. Consequently, the servicing agree - ment usually contains such arbitrary termination provisions. 3.6 Principal Defaults Principal defaults used in Swedish securitisation documentation are similar to customary defaults in an LMA-form facilities agreement – ie, the fol - lowing are common default triggers: • non-payment; • misrepresentation; • breach of obligations; • change of control; and • a material adverse change. Other securitisation-specific defaults commonly used include: • the failure by the originator to comply with the risk-retention requirements of the Securitisa - tion Regulation; and • the failure to complete the registration as a financial institution pursuant to the Currency Exchange and Other Financial Operations (Reporting Duty) Act, as outlined in 3.4 Princi- pal Covenants . If the RPA contains a repurchase mechanism, under which the originator is obliged to repur - chase transferred loans in certain situations, the failure to repurchase transferred receivables in order to cure an asset performance failure (for example) is a default.
maintain risk retention in order to ensure compli - ance with the Securitisation Regulation. Any breach of covenants would constitute an event of default and/or an early amortisation trig - ger event. 3.5 Principal Servicing Provisions As outlined in 3.1 Bankruptcy-Remote Transfer of Financial Assets , the servicer is often the par - ent company of the issuer and is also the original originator of the receivables. Due to the close corporate relationship between the issuer and the servicer, the servicing agreement contains strict provisions about the services provided, • reporting requirements (including require - ments under the Securitisation Regulation); and • related information undertakings. A common Swedish law-governed structure (as further outlined in 1.2 Structures Relating to Financial Assets ) entails that, following the transfer of receivables from the originator to the issuer, the debtor will continue to make pay - ments of principal and interest into an account held by the originator, which will then make daily sweeps of collected monies to an account of the issuer. Given this typical structure, the servicing agreement usually contains provisions regulat - ing that such loan receipts be held as escrow funds by the servicer on behalf of the issuer in order to avoid commingling with the servicer’s other assets. including but not limited to: • administration of the loans; • record-keeping; • the collection of loan receipts; Furthermore, as a result of the established true sale principles mentioned in 6.3 Transfer of
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