The recent Spectrum Plus ruling poses little threat to U.K. whole business ABS, say Fitch Ratings analysts. "While overall, the ruling could impact loss given default it will not impact probability of default and therefore will not affect ratings," said Philip Walsh, senior director of European structured finance at Fitch in a teleconference last week.

The Spectrum Plus saga (see ASR 6/7/04) saw further developments at the end of June when the House of Lords decided that the chargee (Natwest) which held an English law fixed charge over the book debts could not sufficiently demonstrate that it exercised control over the assets and the proceeds thereof in the bank account. In the circumstances of the National Westminster Bank (NatWest) v Spectrum Plus case, the court therefore held that the charge was to be interpreted as floating- rather than fixed-rate - the bank did not directly control the book debts, which puts the bank behind secured and preferential creditors. As a result of the ruling, lenders will now need to consider whether they will need to obtain additional security, such as guarantees from a company's directors, in order to secure a fixed-charge status.

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