Key features of securitisation and asset based lending

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Key features of securitisation and asset based lending
  • Brexit
  • Rationale
  • Structure
  • 'Bankruptcy remoteness' compared with 'bankruptcy proof'
  • Features of a SPV
  • Enforcement methods
  • Relevance to the credit crunch
  • Difficulties in restructuring securitised transactions

Key features of securitisation and asset based lending

IP COMPLETION DAY: The Brexit transition period ended at 11pm on 31 December 2020. At this time (referred to in UK law as ‘IP completion day’), transitional arrangements ended and significant changes began to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for R&I?

Brexit

BREXIT: The UK is leaving the EU on Exit Day (as defined in the European Union (Withdrawal) Act 2018). This has an impact on this Practice Note. For further guidance on the impact of Brexit on securitisation, see Practice Note: Impact of Brexit: Securitisation Regulation—quick guide.

Rationale

Essentially, securitisation makes use of a receivables income stream through the creation of a special purpose vehicle (SPV) which issues bonds or notes to obtain cheaper finance. It was originally used in the US and is essentially a sophisticated method of factoring receivables. Types of receivables which can be securitised include:

  1. mortgage payments

  2. bank loan repayments

  3. lease/rental payments

  4. credit card repayments

  5. insurance premium payments

Benefits of securitisation include:

  1. cheaper borrowing—the SPV may get a better credit rating than the debtor company (originator). Either the obligors for the receivables have a better credit rating than the originator, or credit rating agents may find it easier to rate a single

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