Asset-based lender meaning

Scope of this Checklist This Checklist sets out the points to consider when a company is proposing to grant a mortgage. It proceeds on the basis that an English or Welsh company will be granting a mortgage to a lender situated in England or Wales. In this Checklist: the company granting the mortgage is the 'mortgagor' the party to whom the mortgage is granted is the 'mortgagee' the document recording the mortgage is the 'security document' Preliminary questions before taking security by way of a mortgage Is a mortgage the right method of taking security? A mortgage transfers title to the asset, while preserving the mortgagor's equity of redemption so that, once sums due have been paid in full, title can be transferred back to the mortgagor (note that some mortgages, such as over land, are statutory, meaning there is no transfer of title). The use and possession of the asset will remain with...

Funder’s primary objective When a buyer takes property subject to overage and seeks finance secured on that asset, a funder will require assurance that the overage provisions do not obstruct or curtail enforcement of its security. The lender must be confident its charge constitutes sound security over the property. Property and associated rights Assess the character of the site to be charged. Where it forms part of a broader development, consider whether, on a power of sale being exercised, the property will depend on rights over adjoining land held (or to be acquired) by the buyer, such as: rights of way rights concerning service media rights of support If such rights are necessary, agree a form of deed of easement to be annexed to the charge, and allow the funder to require grant of that easement when needed. Also examine whether the seller’s chosen mechanism for securing the overage is acceptable to a funder...

This checklist outlines the points to consider when a company plans to grant a pledge. It assumes a company incorporated in England or Wales is granting a pledge to a lender located in England or Wales. In this checklist: the company giving the pledge is the ‘pledgor’ the party in whose favour the pledge is given is the ‘pledgee’ the document setting out the pledge is the ‘security document’ Preliminary questions before taking security by way of a pledge Is a pledge the appropriate method of taking security? Is the asset of a type that can be pledged? Assets capable of being pledged include: goods (that is, tangible, moveable items such as precious metals or other commodities) documents of title to goods or intangible assets where title can pass by delivery of a document (for example, bills of lading and sea waybills, or bearer securities—the latter now rare in practice), so...

Ireland’s High Court ruled on 27 May 2024 that seeking to reclaim monies paid by Redefine Australian Investments Inc (Redefine Australia) to its lender — Redefine Cyprus, a subsidiary of Brightbay Real Estate Partners Ltd based in the Isle of Man — would in effect require Ireland to give effect to a foreign state’s tax laws, something barred by both case law and the common law. Justice Rory Mulcahy recorded that Redefine Australia was established in 2009 to acquire property securities from an Australian property fund. The company, incorporated in Ireland, obtained a £100m loan from Redefine Cyprus to pursue that objective. Under the loan terms, Redefine Australia was to remit 100% of its adjusted net income as interest, ensuring it generated no profit and would therefore not be liable for Australian capital gains tax. The investments performed, and Redefine Australia returned £56m in total...

Corporate governance Barclays and Citigroup to lift bankers’ bonus cap Reports indicate Barclays plc will be the first UK lender to remove the bonus ceiling for its material risk takers, after shareholders at its May 2024 AGM authorised the board to set whatever fixed-to-variable pay ratios it deems suitable (see: Share Incentives weekly highlights-9 May 2024). The previous cap stemmed from EU-derived rules applying to UK staff, which the FCA and PRA abolished with effect from 31 October 2023 via their joint policy statement PS9/23-Remuneration: Ratio between fixed and variable components of total remuneration (bonus cap)-see: Share Incentives weekly highlights-26 October 2023-Company law, governance and regulatory issues. Mirroring JPMorgan’s stance, Barclays is expected to hold base salaries for material risk takers steady while permitting variable awards up to ten times fixed pay, replacing the prior two-times ceiling. There are also reports that Citigroup is making comparable changes for its London-based employees...

Outcome 11.3 Outcome 11.3 of the former 2011 code (old code) in the 2011 SRA Handbook on contract races is not carried across into the two new codes under the new SRA Standards and Regulations. Is any other provision in the new codes relevant to contract races? Yes. Principles 2 (maintaining public trust and confidence), 4 (acting honestly) and 5 (acting with integrity) in the Standards and Regulations almost certainly encompass contract races, and paragraphs 1.2 (not taking unfair advantage) and 1.4 (not misleading) in the 'Maintaining trust and acting fairly' section of the new codes would bear upon contract races in property transactions. Contract races can be ethically complex, arising where a property seller instructs their solicitor to proceed with more than one prospective buyer. In such circumstances it is common for attempts by the selling client or a bidder to secure a benefit (for example, receiving the pre-contract pack ahead of others in the race), meaning the contest is not genuinely fair or transparent. This dynamic frequently...

Loan market and developments Overview Broadly, Scotland’s loan market mirrors that of England. Financial services regulation operates on a UK‑wide basis; a substantial body of legislation governing companies and other corporate vehicles (including corporate insolvency) likewise applies across the UK; and all Scottish clearing banks conduct business in every UK jurisdiction, as do their counterparts across the UK. In practical terms, this means English law governed loan documents typically require minimal amendment for UK cross‑border lending transactions. There are, however, some differences in terminology and certain statutory variations that must be allowed for; beyond those matters, an English law loan document and a Scots law loan document are closely aligned. It is commonplace, for example, for English law loan agreements to be deployed in Scottish lending transactions. The principal divergences between the jurisdictions arise in relation to property law and to the law concerning rights in security, where Scots law and English law are notably distinct. Lending Is it necessary to secure any consents or licences to...

Loan market and developments Please provide a succinct outline of the current condition of the loan markets in your jurisdiction and any noteworthy recent developments. The US corporate loan market remains a significant pillar of the US economy. While the US loan market has undergone considerable change in recent years, it is still resilient and continues to be one of the most inventive and consequential areas within the US capital markets. Two principal components of the US corporate loan space are broadly syndicated loans (BSL) and private credit transactions. The BSL segment is a key funding source for medium- and large-sized companies, comprising loans where multiple banks and non-bank financial institutions extend finance through a syndicate of lenders. Private credit typically involves lending by non-bank lenders on a bilateral basis or by a small cadre of lenders (often termed ‘club deals’). Both segments have seen strong growth and transformation over the past several years. Broadly Syndicated Loans Although private credit often captures more media focus, syndicated lending...

This Practice Note looks at: the principal features of loan to value (LTV) covenants in secured lending transactions possible issues with calling an event of default arising from a LTV covenant breach potential challenges to an event of default based on a LTV covenant breach remedying a LTV covenant breach the impact of the economy on LTV covenant breaches LTV covenants are a vital element of risk management in secured lending. An LTV covenant is a common financial covenant that requires the outstanding principal of a loan, expressed as a percentage of the value of the security charged in favour of a lender, to stay below a specified threshold for the life of the loan. This gives lenders a means to monitor and protect the strength of their security over time. For borrowers, grasping and negotiating these covenants is key to achieving favourable loan terms and steering clear of the pitfalls that can arise from a breach. Although a...

Dear [ insert name ], [ insert details of property and lender’s reference ] At this point in your matter, we consider it prudent and in your best interests for [ insert name of borrower ] (the ‘Borrower’) to obtain [ insert type of insurance—eg defective title ] in respect of [ insert description of the property ] (the ‘Property’). You will benefit from this cover because [ describe how lender benefits—eg under the standard terms, as co-insured etc. ]. This is something we have already discussed, and you have confirmed that the Borrower will arrange the insurance accordingly. The Borrower will purchase the policy from [ state name of insurance provider ] [ and you have authorised us to disclose relevant personal data and information to them for this purpose ]. [ Name of firm acting for lender ] will not be involved in arranging the policy. [ Name of firm ] act on behalf of the Borrower (the ‘Borrower’s Solicitors’). Any statements in this correspondence that refer...

Prepared regarding [ name of borrower ] (a limited company registered in England and Wales with company number [ company number ]) Prepared for [ name of lender ] By [ name of law firm ] Date: [ date ] 1 Scope This report addresses the validity and enforceability of the security held by [ name of lender ] (the Lender) in connection with the obligations of [ name of Borrower ] (the Borrower). We have evaluated the enforcement avenues open to you should you elect to pursue enforcement action. Definitions are provided in Appendix 1 to this report. Our analysis is based on the documents you supplied, as itemised in section 4, together with the searches described in Appendix 3. [ We have not undertaken a detailed review of the terms of any relevant loan facilities for the purposes of this report. If you require a review of the loan facilities to assess potential defaults and breaches, please contact us ]...

Letter of non-crystallisation This precedent letter is used where a buyer acquires a business/asset subject to a floating charge (the Charged Asset), or a lender takes a second floating charge. It confirms the charge has not crystallised, no steps have been taken to crystallise it, and the chargee consents to either a sale or a second floating charge. Under a floating charge, the chargor may in the ordinary course sell the asset or grant further security (unless restricted) until crystallisation. Once crystallised, the charge becomes fixed and the chargor loses that freedom. Buyers/new lenders should seek confirmation that crystallisation has not occurred. A letter may come from the chargee or chargor, but a chargee’s letter is preferable; though not obliged, chargees usually provide it. Buyers favour unlimited confirmation; chargees often insist on a knowledge qualifier. Chargee’s headed paper; recipient details and date. Reference Debenture/Floating Charge dated [date] (the Security Agreement) between [Chargor] and chargee. Certify: [to the best of our knowledge, information and...

Inheritance tax (IHT) treatment of the loan The IHT consequences for a loan turn on its precise wording and conditions, such as whether the borrowing is secured. You should also review the lender’s Will, in case the testamentary provisions discharge the liability. In practice, the difference between classifying the loan as an asset of the estate on death or as a failed potentially exempt transfer immediately before death may, in some cases, make no difference to the IHT due. To reach the correct analysis, the language of sections 4 and 3A of the Inheritance Tax Act 1984 (IHTA 1984) must be considered. In particular, section 4 (transfers on death) provides that IHT applies as though, immediately prior to death, the deceased had made a transfer of value—i.e. a deemed transfer immediately before death that triggers the IHT charge...