The issues and regulations are similar to the general securitisation structure in double SPE structure securitisations, but the titling trust may require additional analysis for purposes of the Investment Company Act exemption compared to the other entities in the structure. SOFR has been used routinely in CLOs, where the pool assets consist generally of floating rate commercial loans, but the ARRC has expressed displeasure over the recent use of term SOFR as the benchmark for other floating-rate ABS backed by fixed-rate receivables. While New York law governs the vast majority of LIBOR-utilising contracts, the statute did not and could not address LIBOR transition issues in all legacy contracts. These GSEs purchase loans that satisfy their origination criteria and issue securities backed by pools of such loans that are guaranteed by the relevant GSE. The industry has been focused on obtaining permanent relief against those aspects of the new regulations that are particularly burdensome for securitisation SPEs. The SEC has generally indicated that CDSs, the most common type of derivative used in synthetic securitisations, are not self-liquidating financial assets. degree of difficulty in segregating and ascertaining individual assets and liabilities; presence or absence of consolidated financial statements; profitability of consolidation at a single physical location; commingling of assets and business functions; unity of interests and ownership between the various corporate entities; existence of parent or intercorporate guarantees or loans; and. While that analysis is not a legal analysis per se, it will involve a review of the various contractual rights existing in the transaction documents. As noted above, transactions that violate the securities laws may be voidable and may give rise to both private and public enforcement. The Section 3(c)(5) exemption is available for issuers securitising accounts receivable, loans to manufacturers, wholesalers, retailers or purchasers of specified merchandise, insurance or services, as well as for mortgages and other liens on and interests in real estate as long as a holder of any such issuers securities does not have the right to require early redemption of such securities. There are also some client secondments available in the financial space, covering investment banks and companies like ICE (Intercontinental Exchange). Advised Ardagh Group on its definitive business combination agreement with Gores Holdings V to create an independent public company. Shearman & Sterling 2023 | Attorney Advertising, Committee on Foreign Investment in the United States (CFIUS), Financial Institutions Advisory & Financial Regulatory, Environmental, Social and Governance (ESG), EU General Data Protection Regulation (GDPR), Future of Financial Services Regulation in the UK, Global Compliance & Anticorruption (FCPA), Special Economic Zone and Regulatory Drafting. Although the analysis differs somewhat between various US circuits, in general a bankruptcy court may order substantive consolidation where the separateness of the entities has not been sufficiently respected or where the affairs of the debtor entities are so entangled that unscrambling will be prohibitive and hurt all creditors. In CLOs the servicing agreement is typically referred to as a Portfolio Management Agreement, Collateral Management Agreement or Investment Management Agreement (or similar term). Consequently, a true sale and non-consolidation opinion delivered as part of a securitisation transaction may receive additional comments from accountants relating to assumptions and qualifications that are viewed as potentially problematic under applicable accounting literature. In turn, this has allowed for the emergence of a highly liquid to-be-arranged (TBA) market, where pools of MBSs are deemed to be fungible, and traded, on the basis of a few basic characteristics, such as the issuer, amortisation type (eg, 30 years or 15 years), the coupon rate, the settlement date and the maximum number of mortgage securities per basket. Shearman & Sterling. In response to feedback from industry groups, the SEC issued a no-action letter in December 2021, which established a tiered set of compliance dates in an effort to allow brokers and dealers time to bring themselves into compliance. Its fast-paced, but you are never needlessly busy, a trainee told us. Market participants have coalesced around a view that, if the issuer of a Rule 144A asset-backed security were to undertake to make the required Rule 144A information publicly available and to keep it current, that would suffice for broker-dealers to quote those securities. The firm was recognized with 106 practice and individual rankings for excellence representing clients across our practices and industries throughout the United States. Under older practice, which still applies in some circuits, the courts may rely on a multi-factor analysis. In fact, many of these elements are present in most bankruptcy cases involving holding company structures or affiliated companies without thereby leading to substantive consolidation. Morgan, Lewis & Bockius LLP Sections 15E and 17 of the Exchange Act and the rules promulgated thereunder establish a detailed set of records that must be created and disclosed to the SEC, and mandate that some of this information must be made publicly available free of charge, including the assigned credit rating and any subsequent upgrade or downgrade. However, asset-level disclosures of the level of detail required in Reg AB II offerings are not commonly included in private placements. It is, however, not common to obtain a bankruptcy opinion for such protected contracts. They are strong academics, evidence of relevant work experience, tailored answers to our questions, and an error-free application form. In addition, a non-consolidation opinion is often required if the transfer is to an affiliated entity (ASC 860-10-55-18A), although the opinion may not be required if the accountants are comfortable that the appropriate legal opinion(s) would be given if requested (id at 55-18B). The presence or absence of some or all of these factors does not necessarily result in substantive consolidation. A decision by the Third Circuit is expected by mid-2023. Whether this option covers registered ABS that are subject to Exchange Act reporting requirements but where those requirements were suspended before ABS issuers had to file for the life of the deal poses an interpretive question. KWG Group Holdings Limiteds $378 Million Senior Notes Offering. Investors in securitisations include banks, asset managers, insurance companies, pension funds, mutual funds, hedge funds and high net worth investors. Those rules, which were proposed in July 2022 and adopted in December 2022, will become effective 30 days after their publication in the Federal Register. The issuer is subject to Exchange Act reporting requirements and the issuer has filed all required periodic reports during the prior 12 months or any shorter time it has been required to file reports. Student insights. It is also worth noting that the non-recourse language typically included in agreements with SPEs, including derivative agreements, would cause such derivatives to fall outside the standard terms for derivatives that are currently centrally cleared and traded, although that may change should swaps with such terms be included as part of a traded standard. If a debtor becomes subject to bankruptcy proceedings, creditors will, with some exceptions, be automatically stayed from collecting and enforcing against the debtor and any posted collateral. Many of these changes do not appear to be focused primarily on asset-backed securities (ABS) or the securitisation markets, but present unforeseen and challenging consequences. Shearman & Sterling LLP Website www.shearman.com Share profile Contact details Contact number +8621 6136 5000 Related Rankings Chambers Review Notable Practitioners Ranked Notably, the DC Court of Appeals ruled in 2018 that subjecting managers of open-market CLOs to the Risk Retention Rules exceeded the statutory authority under Section 941 of the DoddFrank Act and consequently such CLOs are currently not subject to the risk retention requirements. Highly regarded by major corporations and financial institutions, Shearman & Sterling represents the entire range of global market participants, including issuers, underwriters, investors, trustees, servicers, credit-enhancement providers, lenders, rating agencies and conduits. This may change based on the most recent amendments to the rule, which, effective on 1 October 2020, clarify that a right to remove an investment manager for cause (as defined in the rule) is not an ownership interest. The Trust Indenture Act of 1939 is amended to provide that the right of any holder of any indenture security to receive payment of the principal of and interest on such indenture security shall not be deemed to be impaired or affected by any change occurring by the application of the LIBOR Act to any indenture security. Consequently, a key aspect of securitisations is to isolate the issuer and its assets from such bankruptcy risks by: As an alternative to a true sale structure, it is also possible to transfer exposure to the securitised assets using contracts that are protected against the most troublesome bankruptcy powers. In 2014, the Board of Governors of the Federal Reserve System (the Federal Reserve) and the Federal Reserve Bank of New York (the New York Fed) formed the Alternative Reference Rate Committee (ARRC) to identify possible alternative reference rates for US dollar LIBOR and to identify best practices for implementation of a new reference rate. As a result, the ruling, if upheld on appeal, would allow the CFPB to proceed with an enforcement action directly against the Trusts for liability for actions undertaken by the Trusts servicers (on behalf of the Trusts) and not by the Trusts themselves. Shearman & Sterling has a distinguished history of supporting clients wherever they do business, from major financial centres to growing markets. Graduate recruitment manager, Paul Gascoyne tells us the online form is pretty standard and contains three open-ended questions: 'Why do you want to be a solicitor?' Hogan Lovells has around 2500 attorneys and Shearman boasts about 850. The Trusts hold more than 800,000 private education student loans totalling approximately USD12 billion, all of which were originated by private banks prior to 2008. Shearman & Sterling LLP 20 ans Partner janv. oversight and governance of climate-related risks; how climate-related risks, including those that are reasonably likely to have a material impact on business or financial statements, may affect business; how climate-related risks have affected or are likely to affect strategy, business model and outlook; processes for identifying, assessing and managing climate risks and how those processes fit into overall risk management; impact of climate-related events and transition activities (such as policy changes) on the financial statements and financial estimates; and. clarifying that a determining person includes a person with a contingent future right to select a LIBOR replacement; identifying certain specific benchmark replacement conforming changes that are protected; specifying that a determining person may select the Board-selected benchmark, together with any applicable benchmark replacement conforming changes; expressly providing that the statutes protections apply to any LIBOR contract for which the Board-selected benchmark replacement becomes the benchmark replacement, either by operation of law or by the selection of a determining person; and. representations that the secured party has a perfected security interest. The sponsor is responsible for compliance with risk retention and other relevant regulatory requirements. A place like Shearman & Sterling one of the elite international law firms. All vac schemes run for two weeks and there's room for up to ten candidates on each. None of the Trusts acted or acts as the related lender, originator or servicer of such student loans; they are merely passive ownership entities that distribute collections to the related securitisation debt and equity investors while hiring third parties to undertake the requisite ongoing administrative and servicing activities on their behalf. The NAIC has its own credit rating scale that largely ties to ratings from NRSROs, except for an alternative methodology applied to non-agency RMBSs and CMBSs. Certain types of LIBOR fallback provisions will be disregarded: provisions that base the LIBOR replacement in any way on a LIBOR value, except to account for the difference between LIBOR and the benchmark replacement; and. 11 years ago. Substantive consolidation is an equitable doctrine that permits a bankruptcy court to disregard the separateness of an entity that itself is not otherwise in bankruptcy and that provides an alternative pathway for an SPE to become entangled in its affiliates bankruptcy proceedings. Investors in unfunded ABS tranches will typically have contingent funding obligations and may be required to provide additional credit support or face replacement if their credit drops below agreed levels. Place like Shearman & Sterling has a distinguished history of supporting clients wherever they do business, from major centres... Some or all of these factors does not necessarily result in substantive.... 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