Security

Types

What types of collateral/security are typically granted to investors in a securitisation in your jurisdiction?

Granting collateral or security is not customary in Spanish securitisation transactions. One of the main reasons is because of their almost ring-fenced structures. As described in questions 28 and 32, the assignment of the receivables to the FT may only be rescinded or challenged under article 71 of the Insolvency Act (Law No. 22/2003) by the insolvency administration and in so challenging, the insolvency administration will have to prove the existence of fraud in the assignment. Moreover, since the FT lacks legal personality, it cannot be the subject of insolvency proceedings.

In some securitisation transactions, a pledge over the collection account is granted by the servicer (when the servicer is the assignor) in favour of the FT in order to mitigate the commingling risk derived from a potential insolvency of the servicer.

Perfection

How is the interest of investors in a securitisation in the underlying security perfected in your jurisdiction?

See question 25.

Enforcement

How do investors enforce their security interest?

See question 25.

Commingling risk

Is commingling risk relating to collections an issue in your jurisdiction?

In the event of insolvency of the originator, all FT’s assets held by the originator, except for cash, owing to its fungible nature, will become the property of the FT and must be made available under the terms of articles 80 and 81 of Law No. 22/2003. According to most scholars’ interpretation, if the originator is declared insolvent, monies received and held thereby on behalf of the FT in its capacity as counterparty to certain agreements, signing before the date of declaration of insolvency may be affected by the results of the insolvency. Therefore, the commingling risk only exists in respect of the cash deposited in originator’s account before getting transferred to the FT but not in relation to the collections in respect of non-transferred receivables. Nevertheless, the prospectus and the deed of incorporation of the FT would envisage certain mechanisms aimed at mitigating the aforementioned effects in relation to cash owing to its fungible nature, such as transferring the balances deposited in the account opened with the originator or the affected provider to another account or accounts opened on behalf of the FT in the event that the provider of the account concerned loses the minimum rating required.