By James Patti, partner at Mayer Brown Rowe & Maw, with a focus on emerging markets, including future flow securitizations.

U.S. market participants have for some time found ways to address the reality that the desire of debtors to securitize their receivables conflicts with the desire of creditors to impose "negative pledges" that restrict a debtor's use of its assets to support other funding programs. For example, when negotiating a new credit agreement, debtors and creditors will often include a negative pledge covenant that contains a securitization-focused exception. Numerous formulations for these exceptions have been used, and one common approach is to restrict the permitted securitizations to transactions in which there is "no recourse" to the company and/or where the initial outstanding principal amount of the securitization does not exceed the value of the assets that have been securitized.

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