Earlier this year the U.K. government published a White Paper, entitled Productivity and Enterprise, Insolvency - A Second Chance. The securitization community waited with bated breath to see what it would contain in terms of repercussions for whole-business deals.
The part that refers to securitization is set out in paragraph 2.18: "The Government recognizes that the floating charge and then right to appoint an administrative receiver plays an important role in certain transactions in the capital markets. We will allow the right to appoint an administrative receiver to continue where floating charges are granted in relation to such transactions."
Nevertheless, the White Paper still did not seem to offer the answers that lawyers were looking for. Conor Downey, partner at Orrick, Herrington & Sutcliffe added: "The White Paper is still unclear on what are the exact implications for securitization. As a lawyer, I am concerned when I am asked to legally define securitization. This is because it is difficult to find an appropriate definition, which is broad enough to include the wide variety of structures used in securitization deals but not so general as to capture
the huge variety of other transactions which might well include transactions of the very type which the provision in question is aimed at. On the other hand a narrow definition of securitization may well not work in practice as it may not include some of the more innovative loan and trust structures."
Downey added that the Treasury might decide to use a licensing procedure. "In that case it could capture all the nuances in the deals, but it would be an additional procedure adding to the complexity of overall securitization process. Nevertheless I expect that there will be lobbying going forward by various industry groups to make sure that concerns from securitization specialists are picked up. "
Other market participants also seemed to agree that the wide-sweeping changes to the insolvency regime will not in any way damage the whole-business deals in the U.K.