The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Securitisation—security
  • The purpose of security in securitisations
  • The security package
  • The secured creditors
  • Note events of default
  • Acceleration and enforcement
  • The importance of administrative receivers for UK securitisations: Insolvency Act 1986, s 72B
  • The priorities of payment, or 'waterfall'
  • Problems with enforcement

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 guidance, see Practice Note: Brexit—impact on finance transactions—Brexit planning and impact—financial services, Brexit—impact on finance transactions—Key issues for securitisation transactions and Brexit—impact on finance transactions—Derivatives and debt capital markets transactions—key SIs.

The purpose of security in securitisations

In a securitisation, the issue of security is particularly all-encompassing: all of the issuer's rights are secured in favour of a security trustee for the benefit of all the issuer's secured creditors, usually pursuant to a single security deed.

The creation of enforceable security interests over the underlying assets of the issuer (called the 'security package') consequently underpins both the credit and the legal analysis of a securitisation:

  1. credit analysis—an important part of the credit analysis of a securitisation consists in assuming that the assets' value will be realised through enforcement rather than repayment. Similarly, a mortgage lender will base its decision to lend principally on the value of the mortgage ie the value of the asset that will be enforced upon in the event of a default rather than the mortgagor's ability to pay based on his income stream

  1. legal analysis—great attention is paid by the transaction lawyers to ensure that each asset of