UK Law and Practice Contributed by: Guy O’Keefe, Richard Jones, Oliver Wicker and Kate Patane, Slaughter and May
2.8 Security Trustees/Agents A security trustee (or, less frequently, a secu - rity agent) is appointed to hold and manage the security interests on behalf of the secured parties (most notably, the investors). Typically the same firm as the note trustee, the security trustee takes, directly, the benefit of the security and holds it on behalf of the secured parties. Its responsibilities include managing the secu - rity according to the terms of the security docu - mentation, handling enforcement proceedings in the event of default (as directed by noteholders) and distributing proceeds from any enforce - ment. Although focused on security, the role of the security trustee overlaps with that of a note trustee and both the note trustee and security trustee will have a role to play where consents are required (for example, in relation to amend - ments or in the case of a default). 3. Documentation 3.1 Bankruptcy-Remote Transfer of Financial Assets Customary documentation effecting bankrupt - cy-remote transfers to an SPE typically com - prises a receivables purchase agreement and a declaration of trust over amounts standing to the credit of collection accounts. Key terms include: • the assets to be transferred to the issuer by the originator; • the purchase price; • conditions precedent for the transaction to occur; • conditions for perfection of the transfer, such as notifications or registrations (where neces - sary); • comprehensive seller warranties on the qual - ity and status of the assets; and
afforded by credit enhancements and the ratings provided by credit rating agencies. 2.7 Bond/Note Trustees A note trustee is typically appointed on behalf of the investors in the securitisation. The note trustee will typically be party to the key transaction documents and give the investors, indirectly, the benefit of the representations, war - ranties and undertakings of the other parties to such documentation. In practice, the note trustee will typically play an active role in two circumstances: • during the ordinary life of the deal, when it is proposed that transaction documents are to be modified, in which case the note trustee will either exercise discretion to allow the amendment to be made or oversee the pro - cess of approaching noteholders for consent; and • in the case of a default, whereupon the note trustee may be directed by noteholders to declare a default and accelerate obligations under the notes. In Europe, note trustees will typically otherwise play a passive role and not seek, for example, to monitor compliance. Note trustees are usually trust corporations or financial institutions with dedicated trustee departments. While note trustees are common in securitisation structures, some transactions might utilise alternative mechanisms like an owner trust or a fiscal agent arrangement, which provides a different level of oversight and con - trol over the adherence to the structure’s terms but may offer less comprehensive protection for noteholders than a traditional note trustee.
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