USA Law and Practice Contributed by: Bjorn Bjerke, Corey Reis and Joshua Kopel, A&O Shearman
of noteholders, and possess or have control of underlying pledged assets on behalf of note - holders in cases where possession or control is required to perfect such security interest. The firm acting as the bond/note trustee for an issuance typically also acts as a security trustee/ agent. 3. Documentation 3.1 Bankruptcy-Remote Transfer of Financial Assets The typical items of documentation used to effectuate bankruptcy-remote transfers are: • asset sale agreements; Title is generally not dispositive of ownership, nor is it necessary for the consideration to be in the form of cash. Contributions to SPEs in exchange for a corresponding increase in the value of any equity held in such SPE would typi - cally also be good consideration. The key is for the relevant documentation to satisfy the true sale criteria discussed in 6.1 Insolvency Laws (clear identification of sold asset, arm’s length price, representations and warranties as of time of transfer, provisions to ensure perfection of transfer, indemnification and limiting repurchase and indemnification obligations consistent with true sale, specifying the intent to treat the trans - action as a sale, and, if applicable, a back-up security grant consistent with true sale). Participation agreements will also typically include provisions relating to a participation buy - er’s ability to give consent and otherwise partici - pate in voting actions relating to the underlying • participation agreements; and • asset contribution agreements.
asset, as well as “elevation rights” that establish when either party to the participation can call for reasonable efforts to effectuate a full assignment of title. The Federal Deposit Insurance Corpora - tion (FDIC) has promulgated non-exclusive safe harbour provisions for participations involv - ing covered banking entities in 12 CFR 360.6 which, if complied with, provide additional com - fort that the FDIC, when acting as conservator or receiver, will respect such participations as an assignment. 3.2 Principal Warranties The typical representations and warranties in the sale agreement address: • satisfaction of specified eligibility criteria when sold; • absence of other encumbrances; • transfer of title; • all required consents and authorisations hav - ing been obtained; • compliance with the law; and • various additional tailored representations. The typical enforcement mechanism is notice and indemnification obligations, coupled with a repurchase obligation in the case of a breach of any asset-level representation that has not been cured in a timely manner. Typically, the power to exercise such rights and remedies is given to the trustee with provisions that entitle the trustee to obtain directions backed by indemnification. In private deals, the investor vote required for certain actions is primarily a negotiated point, although in registered securitisations these requirements are more prescribed. For exam - ple, Reg, AB II specifies that the transaction documents cannot require more than 5% of the principal amount of notes to direct the trustee to exercise its remedies.
470 CHAMBERS.COM
Powered by FlippingBook