North Grounds Holding Co. is trying to add a twist on bankruptcy remoteness.
The company makes a business solely by generating special-purpose entities for asset-backed securitizations and it is signaling a possible wave of things to come, said Thatcher Stone partner of Rosenman Colin LLP, a firm regularly employed in asset-backed deals.
North Grounds is currently one of maybe two or three companies doing this, Stone said.
In many asset-backed transactions, either the issuer, bank, or law firm - or a combination of the companies involved - create an entity to assume ownership of all assets, which establishes the bankruptcy remoteness. Ideally, the trustee company has no affiliation with the deal.
Companies like North Grounds, however, provide true bankruptcy remoteness, which, Stone said, pleases the ratings agencies.
"The reason that it's positive is it lets sellers, buyers, certificateholders and lessees know that the special-purpose entity doesn't have an axe to grind with anyone in the deal," said Thatcher. "They're not related to the seller, they're not related to the certificate holders, they're not related to the servicer, not anybody.
"And the subsidiaries of North Grounds are there to either be the special-purpose entity of the certificate owners, or alternatively provide the one or two directors that need to be independent - or, provide a separate entity for some regulative institution that for accounting purposes can't be involved," Stone said.
Also of note, North Grounds is controlled by the trustees of an Internal Revenue Service-approved charitable trust, and the majority of fees generated by its subsidiaries are donated to an institution of higher learning.
Delaware-based North Grounds recently announced that it has closed over $1 billion in securitizations since it was established in 1996. North Grounds has primarily worked on aircraft lease-backed securitizations, with companies such as Boeing Capital Corp., Reno Air, and international airlines including Ireland's Ryan Air.