USA Law and Practice Contributed by: Bjorn Bjerke, Corey Reis and Joshua Kopel, A&O Shearman
as dispositive of the loan or sale characterisa - tion). The courts have also identified a variety of oth - er factors that do not fall within the categories above but may be indicative of a secured loan, including: • the transferor being a debtor of the transferee on or before the purchase date; • the transferor’s ability to extinguish the transferee’s rights in the transferred assets by payments or repurchase by the transferor or from sources other than collections on the asset; and • the transferor’s obligation to pay the transfer - ee’s collection costs for delinquent or uncol - lectible financial assets. Some states have sought to bolster securitisa - tions by restricting recharacterisation of a pur - ported sale transaction. However, there is sig - nificant uncertainty around a bankruptcy court’s acceptance of such statutes, and securitisations are therefore typically structured to comply with the judicially created true sale criteria. It is common to obtain a true sale opinion in securitisation transactions that evaluates the rel - evant facts in light of the factors outlined above. Generally, the opinion will describe the salient facts and analyse these facts in light of the fac - tors identified by the courts as relevant to the true sale determination. The opinion will usually identify these key factors and draw a conclusion based on the overall analysis and reasoning in the opinion letter. 6.4 Construction of Bankruptcy-Remote Transactions Most derivatives, certain mortgage repurchase transactions and many securities contracts are
protected against the automatic stay and some of the most troublesome bankruptcy pow - ers. These types of contracts can therefore be used as a means of transferring exposure to the assets underlying a securitisation as an alter - native to a true sale. Synthetic securitisations typically use credit default swaps (CDSs) to transfer such exposure. If the CDS counterparty becomes subject to bankruptcy proceedings, the SPE will nevertheless have the right to ter - minate and close out each swap entered into with that counterparty, and realise against any collateral or other credit support relating to such swap, without being subject to the stay or the prohibition against ipso facto clauses. It is, however, not common to obtain a bank - ruptcy opinion for such protected contracts. 6.5 Bankruptcy-Remote SPE The organisational documents of the SPE and other transaction documents will typically include a provision limiting recourse solely to the SPE’s assets and a non-petition covenant that restrict involuntary bankruptcy filings against the SPE, subject to applicable law. Additionally, the transaction documents will also typically include other protections such as the appointment of independent directors whose fiduciary duties run to creditors and whose consent is required for a bankruptcy filing. See 6.2 SPEs .
7. Tax Laws and Issues 7.1 Transfer Taxes
In the USA, taxes can theoretically be assessed at federal, state and local level. There is no fed - eral value added tax, sales tax or stamp tax on the transfer of financial assets to a securitisation SPE, but in some cases the transfer of loans or leases accompanied by transfers of the underly -
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