The first part of his paper provides a general introduction to the process of securitization via an SPV. The second part of this paper addresses the bankruptcy remoteness of an SPV from a choice of law perspective by focusing on consolidation, transfer of assets and clawback.
Securitization is the process of pooling assets (e.g. residential or commercial mortgages, consumer and student loans, auto loans, credit card debts, etc.) and separate risk into tradable securities. It is globally considered to be a very, if not the most innovative development in the modern financial markets whereas the goal is to raise cash at a lower rate compared to other financing alternatives such as corporate bonds or bank loans. Prior to the financial crisis that hit the world globally, securitization was booming and the issuance volume peaked in 2006 at around approximately USD 4 trillion. Following the crisis, this number slumped to about USD 500 billion in 2015.
One of the peculiarities of securitization is its cross-border connection where multiple jurisdictions are involved for the designing, planning and implementation of the whole transaction and therefore, securitization tends to be a complex undertaking that requires not only a significant amount of legal and economical due diligence but also negotiation and legal work in form of analysis and document drafting. Additionally, to further complicate this issue, only a few countries have enacted specific laws for securitization. As a result, the choice of law aspects for securitization are manifold and need to be carefully investigated.
The first part of this paper provides a general introduction to the process of securitization via an SPV. The second part of this paper addresses the bankruptcy remoteness of an SPV from a choice of law perspective by focusing on consolidation, transfer of assets and clawback.
Table of Contents
- 1 Introduction
- 2 Process of Securitization
- 3 Selected Choice of Law Issues
- 3.1 "Consolidation of the SPV with the Originator"
- 3.2 Transfer of Assets
- 3.3 Clawbacks
- A Securitization
Objectives and Key Themes
This research paper examines selected choice of law issues arising from the remoteness of a Special Purpose Vehicle (SPV) in securitization. It aims to analyze the legal complexities involved in such transactions, focusing on specific areas where conflicts of law might arise.
- Choice of Law in Securitization
- Legal Status and Remoteness of the SPV
- Transfer of Assets and Associated Legal Implications
- Clawback Rights and Conflicts of Law
- Consolidation of the SPV with the Originator
Chapter Summaries
1 Introduction: This introductory chapter likely sets the stage for the research paper, defining key terms like securitization and SPV, and outlining the scope and objectives of the study. It probably introduces the central problem of choice of law in the context of securitization transactions involving potentially remote SPVs and hints at the complexities that will be explored in the following chapters. It likely establishes the importance of the research by highlighting the significant financial implications of securitization and the need for a clear understanding of the applicable law.
2 Process of Securitization: This chapter would detail the mechanics of a securitization transaction. This would encompass the various stages involved, from the origination of assets to the issuance of securities. A discussion of the roles and responsibilities of the different parties involved (such as the originator, SPV, and investors) and the legal structure of the transaction is expected. Understanding this process is crucial to grasping the choice-of-law issues discussed later as it provides the context for the legal relationships created during securitization. Specific examples of different securitization structures might be provided to illustrate the diversity of the field and their varying implications.
3 Selected Choice of Law Issues: This chapter likely delves into the core subject matter of the paper. Given the sub-sections, it would analyze specific choice-of-law problems connected to the SPV's remoteness. The first sub-section ("Consolidation of the SPV with the Originator") likely analyzes the legal implications of a potential merging of the SPV and the originator, considering the conflict-of-law implications of different jurisdictions’ insolvency rules. The "Transfer of Assets" section would likely address the legal challenges of transferring assets to the SPV across multiple jurisdictions, discussing issues of title and risk transfer. The "Clawbacks" section would likely examine the complexities of recovering assets from the SPV under various jurisdictions' laws, a situation which arises in the case of insolvency or fraud.
A Securitization: This section, denoted as an appendix, likely provides a concrete illustration of a securitization transaction, serving as a practical example to illustrate the theoretical concepts and legal issues discussed in the main body of the paper. It functions as a case study, demonstrating the application of the principles described in the preceding chapters.
Keywords
Securitization, Special Purpose Vehicle (SPV), Choice of Law, Conflict of Laws, Asset Transfer, Clawback Rights, Insolvency, Remoteness, Corporate Law, International Private Law, Legal Consolidation.
Frequently Asked Questions: A Comprehensive Language Preview on Securitization and Choice of Law
What is the main topic of this research paper?
This research paper examines selected choice-of-law issues arising from the remoteness of a Special Purpose Vehicle (SPV) in securitization. It analyzes the legal complexities involved in securitization transactions, focusing on areas where conflicts of law might arise.
What are the key themes explored in the paper?
The paper explores several key themes, including choice of law in securitization, the legal status and remoteness of the SPV, transfer of assets and associated legal implications, clawback rights and conflicts of law, and the consolidation of the SPV with the originator.
What is a Special Purpose Vehicle (SPV) and its role in securitization?
An SPV is a legal entity created specifically for securitization transactions. Its role is to isolate the securitized assets from the originator's other assets, reducing the originator's risk and allowing for the creation of more secure investments.
What are the key stages in the securitization process discussed in the paper?
The paper details the mechanics of securitization, encompassing stages from asset origination to securities issuance. It discusses the roles of the originator, SPV, and investors, and the legal structure of the transaction.
What choice-of-law issues are specifically analyzed in the paper?
The core of the paper analyzes choice-of-law problems related to the SPV's remoteness. This includes analyzing the legal implications of the SPV's potential consolidation with the originator, the transfer of assets across jurisdictions, and clawback rights in different legal systems.
What is the significance of the "remoteness" of the SPV?
The "remoteness" of the SPV refers to its legal and operational distance from the originator. This remoteness creates complexities in determining which jurisdiction's laws govern various aspects of the securitization transaction, leading to potential conflicts of law.
What is the purpose of the chapter on "Consolidation of the SPV with the Originator"?
This chapter analyzes the legal implications if the SPV and the originator merge, specifically examining the conflict-of-law implications under different jurisdictions' insolvency rules.
What are "clawback rights" in the context of securitization?
Clawback rights refer to the ability to recover assets from the SPV. This chapter examines the complexities of recovering assets under various jurisdictions' laws, particularly in cases of insolvency or fraud.
What is the role of the Appendix (Section A: Securitization)?
The appendix provides a practical example of a securitization transaction, serving as a case study to illustrate the theoretical concepts and legal issues discussed in the main body of the paper.
What are the key words associated with this research?
Key words include: Securitization, Special Purpose Vehicle (SPV), Choice of Law, Conflict of Laws, Asset Transfer, Clawback Rights, Insolvency, Remoteness, Corporate Law, International Private Law, Legal Consolidation.
- Quote paper
- Martin Grod (Author), 2015, Bankruptcy remoteness of an SPV in a securitization. A selected choice of law issues, Munich, GRIN Verlag, https://www.grin.com/document/333735
