What types of collateral/security are typically granted to investors in a securitisation in your jurisdiction?
In a typical security package tied to a securitisation, investors are granted a range of security interests over the vehicle’s assets and rights, including its rights under:
- the receivables;
- bank accounts; and
- various transaction documents.
Locally, the most common types of security that can be taken over the securitised assets are assignments and pledges.
The Securitisation Act provides that, in addition to any security granted to them, investors enjoy a special privilege over the securitisation assets. This privilege extends to:
- the proceeds derived from such securitisation assets;
- any funds received in payment; and
- any other assets acquired with those proceeds.
Such privilege ranks before all other claims at law over the securitisation vehicle’s assets, except for other securitisation creditors which have been granted a prior ranking with the consent or knowledge of the investors.
As securitisation transactions and all related and ancillary acts are typically governed by the law of the underlying assets, this privilege aims to ensure that all valid security over securitisation assets is enforced and is the highest-ranking privilege of the investors under Maltese law, irrespective of the governing law of the security interests.Perfection
How is the interest of investors in a securitisation in the underlying security perfected in your jurisdiction?
Perfection of the security depends on the type of security interest and must adhere to the governing law of the security interest, which – as stated above – is generally not Maltese. While requirements vary between jurisdictions, the interest of an investor is generally perfected through the registration of the interest in a public register or by way of notification or acknowledgement of such interest, to or from the debtor, as applicable.Enforcement
How do investors enforce their security interest?
Security interests are typically granted to a security trustee to hold for the benefit of the investors and are enforceable by the trustee on behalf of the investors only in the event of a default. Investors do not have the right to enforce their security interests directly; however, they can generally direct the security trustee to do so. The process of enforcement varies depending on the terms of the particular security interest.Commingling risk
Is commingling risk relating to collections an issue in your jurisdiction?
In order to prevent or mitigate commingling risk relating to collections, the Securitisation Act provides that in the event of insolvency proceedings taken against the originator (including any dissolution and winding-up proceedings, company recovery procedure, company reconstruction or proceedings affecting creditor rights), the following should not be affected:
- the securitisation vehicle;
- any assets acquired or risks assumed by the vehicle;
- any other assets of the vehicle, including any cash flows or other proceeds owing to the vehicle; or
- any payments due by the underlying debtors in connection with the securitised assets.