What types of collateral/security are typically granted to investors in a securitisation in your jurisdiction?
Security over shares of the Bermuda SPV is often provided under a Bermuda law governed share charge. In addition, in most off-balance sheet securitisations, security is granted over the underlying assets by the SPV in favour of the note trustee or security trustee for the benefit of the secured parties. Such security interests will typically exclude:
- the corporate benefit fee paid to the issuer in respect of the transaction;
- the amounts (if any) remaining from the proceeds of the issuance and allotment of the issuer’s ordinary shares; and
- any accounts maintained in Bermuda maintained in respect of such funds.
How is the interest of investors in a securitisation in the underlying security perfected in your jurisdiction?
As a matter of Bermuda law, a charge is not required to be registered in Bermuda to be valid. However, it may be desirable to ensure the priority in Bermuda of a charge that it be registered in the Register of Charges under the Companies Act. On registration, to the extent that Bermuda law governs the priority of a charge, the charge will have priority in Bermuda over any unregistered charges, and over any subsequently registered charges, in respect of the assets which are the subject of the charge.Enforcement
How do investors enforce their security interest?
Bermuda is internationally recognised as being a creditor-friendly jurisdiction. Much will depend on the remedies and processes as set out in the relevant security document. Other than the remedy of foreclosure, investors are permitted to enforce their contractual rights under the relevant security documents without making an application to Bermuda court or a liquidator (in the case of an insolvency).Commingling risk
Is commingling risk relating to collections an issue in your jurisdiction?
Typically, the subject receivables are not originated by a Bermuda originator and are almost never paid into a domestic Bermuda account.