Collateral

News & Analysis as of

Historic Risk Management Rules and Practices Go Live on March 1, 2017 in Leading Markets

For the first time in the history of derivatives, regulators in leading markets will require assets to collateralize many derivatives which are not settled in a regulated clearinghouse. It is not possible to overstate...more

Security over financial collateral – the CJEU considers the "possession or control" test

The Court of Justice of the European Union (CJEU) has given a preliminary ruling on when a security holder has "possession or…control" of financial collateral for the purposes of Directive 2002/47 on financial collateral...more

Taking a security interest in art

If you have tried to borrow monies and use artwork as collateral, or if you have determined to loan money and take a piece of art as security, you may have encountered some interesting challenges....more

Developments in Unitranche Financing (2016)

The increasing use of unitranche financing, both domestically and abroad, has created new opportunities for middle market loan participants. However, lenders must understand the legal issues and potential bankruptcy risks...more

Collateral 101: Perfecting Security Interests in Common and Uncommon Collateral

As most people (at least in the banking world) know, a security interest is the granting of an interest in property to secure obligations, usually loan debt. If the borrower defaults under its obligations, the bank can...more

How Reporting a Crime May Subject You to Sanctions

You are a creditor and your loan is secured by personal property, let’s say equipment. The borrower recently filed for bankruptcy protection. You receive a phone call from a friend advising you that someone has a moving...more

UK Financial Regulatory Developments - July 2016 #5

Commission reports on FCD - The Commission has reported on the appropriateness of Article 3(1) of the Financial Collateral Arrangements Directive (FCD). The FCD established a framework for the creation and enforcement of...more

Loss Payee Versus Lender’s Loss Payee: One Word Can Make All The Difference

When a lender makes a loan secured by personal property, it will perfect its interest in the collateral under applicable law. To further protect the value of the collateral supporting its loan, the lender will also require...more

Third Circuit: The Repossession of Your Car as Collateral on a Usurious Loan is Not an FDCPA Violation

The U.S. Court of Appeals for the Third Circuit recently held that a repossession company did not violate the Fair Debt Collection Practices Act (“FDCPA”) when it repossessed the defaulting debtor’s car, even though the loan...more

UK Legislation Implementing Regulatory Powers for HM Treasury on Financial Collateral Arrangements

An Order was published implementing provisions in the Banking Act 2009, providing powers to HM Treasury to make regulations about financial collateral arrangements. The relevant provisions come into force on May 25, 2016. ...more

First Impressions and Prohibited Mortgage Modifications in Bankruptcy

Section 1322(b)(2) of the Bankruptcy Code enables a debtor to “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal...more

Chapter 13 Debtor Unable to Modify Confirmed Plan to Surrender Collateral

The U.S. Bankruptcy Court for the Eastern District of North Carolina in In Re Reuben Samuel Royal, Case No, 14-07134-DMW (May 2, 2016) recently concluded that the Chapter 13 debtors cannot surrender a vehicle back to the...more

Deposit Account Control Agreements. Who Needs Em?

You just got your committee approvals for a new relation. It is a borrower you have been after for some time. Approvals are fairly standard and call for a secured credit facility with a priority all business asset lien....more

Industry Associations Publish Format for Information Statement Under EU Securities Financing Transactions Regulation

A form of information statement for usage by collateral takers was jointly published by five industry associations. This is aimed at facilitating compliance with disclosure requirements under the European Union's Securities...more

The Un-Bankruptcy: A Texas Receivership as an Alternative to Bankruptcy (and fourteen ways to appoint a receiver in The Lone Star...

Creditors seeking to exercise control over a borrower or collateral may utilize a number of remedies. They may seek a foreclosure or UCC sale, assignment for the benefit of creditors, file an involuntary bankruptcy petition...more

Delaware Bankruptcy Court Rules TCEH First Lien Distributions Are Governed by the Bankruptcy Code, Not by Intercreditor Agreement...

On March 11, 2016, Judge Christopher Sontchi of the U.S. Bankruptcy Court for the District of Delaware issued an opinion in the Energy Future Holdings bankruptcy that resolved an intercreditor dispute over $90 million in...more

Final European Standards for Derivatives Collateralisation

On 8 March 2016, the three European Supervisory Authorities (ESAs) published their final draft regulatory technical standards in relation to the collateralisation of non-centrally cleared derivatives. The standards are to...more

Blog: Should Insiders Be Permitted To Pledge Their Company Shares?

Many company policies prohibit (or severely limit) officers and directors from pledging their company shares against margin loans, and, as discussed in an article in last week’s WSJ, there seems to be good reason for that...more

Circuit Court Affirms Bankruptcy Order Requiring Creditor to Reimburse Trustee for Maintaining Collateral

In the case of Domistyle, Inc., 14-41463 (5th Cir. Dec. 29, 2015), the United States Court of Appeal for the Fifth Circuit affirmed an order of the bankruptcy court requiring a secured creditor to reimburse the trustee for...more

New EU Regulation on Securities Financing Transactions and Reuse of Collateral

Regulatory context - The regulation on transparency of securities financing transactions and of reuse (the “Regulation”) stems from a belief that the 2007-08 global financial crisis revealed excessive speculative...more

Secured Lenders – Stay on Top of the Law or Proceed at Your Own Risk

For years, the typical post-default strategy of secured lenders has been to foreclose the collateral through the power-of-sale contained in the deed of trust, credit the foreclosure proceeds to the outstanding loan balance,...more

Financial Entity Update: The CFTC’s Proposed Margin Rules for Uncleared Swaps – Goofy Haircut

Under the Margin Rules, swap dealers and major swap participants that do not have a prudential regulator (Covered Swap Entities, or CSEs) would be required to collect and post initial margin for uncleared swaps with financial...more

When a Driver’s License Is More Than a Bad Picture: Is Your UCC Financing Statement Still Effective?

UCC Financing Statements Must Contain the Debtor’s Correct Name - “[A] financing statement is sufficient only if it [among other things] . . . provides the name of the debtor. “ N.C. Gen. Stat. § 25-9-502(a)(1) (emphasis...more

New York’s Revised UCC – Winds of Change (Part 2 of 2)

In this second and last part of this series (click here for Part 1) we discuss the changes to Article 9 (Secured Transactions) of the Uniform Commercial Code of the State of New York (the “NYUCC”), as recently amended by...more

Lender Beware: The Pitfalls of Narrowly Defined Secured Obligations

A recent decision by the United States Court of Appeals for the Seventh Circuit underscores the substantial risks secured lenders take when they narrowly define the obligations intended to be secured by their borrowers’...more

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