Securitizations and Structured Finance Flashcards
What is Securitization?
- Raising capital by using an Underlying Portfolio (UP) of assets to issue debt securities using a Special Purpose Vehicle (SPV);
- In a way that insulates the End Investor from all risks unrelated to the UP’s performance.
P. 747; Lecture Notes.
Henceforth, the Borrower shall be referred to as the ‘Originator’.
Who are the Parties involved in a Securitization?
- SPV.
- Originator.
- Liquidity Provider.
- Credit Enhancement Provider.
- Guaranteed Investment Contract Provider.
- Bond Trustee.
- Share Trustee.
- Underwriter.
Lecture Notes.
Not all of these parties are necessarily involved in every securitization, such as the Share Trustee or the GIC Provider.
Which Documents comprise a typical Securitization?
- Sale Agreement.
- Trust Deed.
- Servicing (Administration) Agreement.
- Liquidity Support (Facility) Agreement.
- Credit Enhancement (Agreements and Provisions).
- Management (of the SPV) Agreement.
- Security Documentation.
- Bond Documentation.
- Underwriting Agreement.
- Prospectus (Offering Circular).
- Derivatives Agreement(s).
Lecture Notes.
Again, not all of these documents are necessary in every securitization.
Which methods can the SPV use to Purchase the Underlying Portfolio?
- Public issuance of debt.
- Private placement of debt.
- Term loan, whether bilateral or syndicated.
Henceforth, consider it elects to issue bonds.
Lecture Notes.
Flexibility within the financing structure can reduce funding costs, e.g. short-term assets can be used to fund medium-term debts and vice versa.
What measure is used to gauge the Value of the Underlying Portfolio?
Cashflow, as it indicates the SPV’s ability to repay the bonds it issues.
P. 749.
Additional considerations like market valuation, insolvency remoteness, and the like are also relevant.
How does Securitization generate Value for both the Originator and Bondholder?
Separating the Originator’s lowest-risk assets from its balance sheet, and raising finance thereagainst decreases:
* Its cost of borrowing; and
* Investment risk for the Bondholder.
Lecture Notes.
Tranching may also be used to further optimize the cost of finance.
How does Tranching optimize the Cost of Borrowing?
The blended interest rate, i.e. the median interest rate across all tranches, is calibrated to be lower than what the interest rate would be for any single tranche.
Lecture Notes.
As discussed elsewhere, tranching does not offend the Pari Passu principle.
For the Originator, what are the Advantages of Securitization relative to the alternatives?
- Lower cost of funding.
- Capital adequacy relief.
- Improved liquidity (especially for revolving structures).
- Maintenance of exclusivity with Debtors.
- Faciliation of access to international capital markets for Originators who could not have otherwise accessed them.
Lecture Notes.
For the Bondholder, what are the Advantages of Securitization relative to the alternatives?
- Lower risk-weighted investment.
- Increased Debtor (SPV) creditworthiness.
- Incorporates independent credit analysis by including Credit Rating Agencies.
- Higher liquidity, due to the securities being rated and Bonds.
- If self-purchasing and a bank, capital adequacy relief through the transformation of banking book assets into trading book assets.
Lecture Notes.
For the Originator, what are the Disdvantages of Securitization relative to the alternatives?
- High up-front costs, both to set up the SPV and over-collateralize it. The former may be countervailed by economies of scale.
- Opportunity cost of over-collateralization, i.e. inert capital.
- Increased complexity and document-intensity.
- The Crown Jewels Problem and potential unpopularity with existing creditors, especially secured ones whose blessing may be necessary.
Lecture Notes.
For the Bondholder, what are the Disdvantages of Securitization relative to the alternatives?
- Prepayment risk.
- Securities may be less liquid than Vanilla Bonds.
- Familiarity with the asset type is necessary.
Lecture Notes.
To a Prospective Bondholder, what are the Factors it considers before investing?
- UP’s quality.
- SPV’s title in the UP.
- Supporting collateral.
- Credit enhancement.
- SPV’s Insolvency remoteness.
Lecture Notes.
Regarding the last point, full and uncontestable beneficial interest held by the SPV is ideal.
What metrics are used to gauge an Underlying Portfolio’s Quality?
- Asset transferability.
- Recharaterization Risk (RCR).
- Maturity: The longer, the riskier.
- Dilution Risk:° The higher, the riskier.
- Credit Rating: The higher, the better.
- Strength of the Originator’s title.
- Exposure to early termination rights.
- Exposure to default and enforcement rights.
- Frequency and size of payment installments: The greater, the better.
Effectively, any relevant legal and commercial issue.
Lecture Notes.
° Dilution Risk is the risk of quality degradation due to the addition of lesser assets over time.
What is Insolvency Remoteness?
Te SPV’s degree of separation from the Originator’s credit risk.
P. 748; Lecture Notes.
“All emphasis in the structuring of the transaction [should be] on the assets being securitized, and all extraneous factors that could possibly seize the cashflow generated by these assets should be removed from the structure.”
For a Prospective Bondholder, why is Insolvency Remoteness so important?
It significantly influences the transaction’s credit rating, since without it, the Originator’s credit risk would contaminate the SPV.
Lecture Notes.
For Banks, is Securitization effective for minimizing Capital Adequacy Requirements (CARs)?
Yes. By transferring debt off-balance-sheet, it creates space for new issuances.
Lecture Notes.
Why is Credit Rating an important metric for Securitization?
Given investors’ lack of time and resources to fully investigate credit quality, ratings largely determine the minimum return they will accept.
Lecture Notes.
Therefore, to raise funds at as low a cost as possible, it is critical to be assigned as high a credit rating as possible.
In determining Credit Rating, is the Credit Risk of the Credit Enhancement and Liquidity Support providers relevant?
Yes.
P. 764.
How may the SPV’s Legal Title in the Underlying Portfolio be Impeached?
In various assets, it may transpire that:
* Assignment was contractually prohibited.
* Third Parties possessed legitimate claims in the interests therein.
* The UDs possessed set-off rights against the Originator, which now obtain against the SPV.
P. 760-761
How may the SPV Hedge against the Impeachment of its Legal Title in the Underlying Portfolio?
It may oblige the Originator to warrant that:
* No contractual restrictions against Assignment exist.
* It is solely entitled to the interest in the assets and has not created any rights therein in favor of third parties.
* Either no set-off rights exist or that all set-off rights have been disclosed.
What is a True Sale Securitization?
One where the Originator transfers its interest in the UP to the SPV by way of sale, including any security or guarantees.
P. 748.
‘Sale’ denotes a Loan Transfer. Ideally, Novation is used, but due to potential issues with security, notice, or general restrictions, Equitable Assignment is typically resorted to. The other methods may be used, but are relatively suboptimal.
What does the term ‘True Sale’ Denote?
A sale that is sufficient under bankruptcy law to remove the Receivables from the Originator’s bankruptcy estate.
Ideally, this means Novation, but Assignment is also acceptable.
Lecture Notes.
What are the Originator’s Objectives in a True Sale Securitization?
- To fully disconnect itself from the SPV.
- To raise finance at a favorable price relative to the alternatives.
- To optimize its balance sheet from the standpoints of both capital adequacy and risk management.
- To fully insulate itself from the risk of the portfolio’s nonperformance, and any liabilities associated therewith.
Textbook – P. 758.
What must the Sale Agreement address?
- Selection of assets comprising the UP.
- Substitution of assets comprising the UP.
- Method(s) of transfer.
- T&Cs, i.e. CPs, R&Ws, EODs, Covenants, etc.
- Ring-fencing and other insolvency remoteness considerations.
Lecture Notes.
Power of Attorney may well be included.
Which Type of Assignment is preferred in Securitization?
Equitable Assignment (EA), namely because it is non-notified and the Originator may wish to avoid informing the Underlying Debtors (UDs) unless absolutely necessary.
P. 748.
Examples of absolute necessity include breach of contract or default, and even, notice will be contained to a need-to-know basis.
How is using Non-Notified Equitable Assignment problematic for the SPV, and by extension, the Bondholders?
- UDs get a good discharge by paying the Originator, which is problematic if it becomes insolvent or breaches warranties.
- UDs accumulate set-off rights against the Originator.
- Priority disputes and the Rule in Dearle v Hall.
- EA may offend negative pledges and contractual restrictions.
- SPV cannot claim in its own name against the Debtors, although this is mostly a procedural problem.
Textbook – P. 749; Lecture Notes.
In Practice, how are Loans transfered by Equitable Assignment for a Securitization?
By way of offer and acceptance.
* The Originator offers the UP to the SPV, who accepts by way of payment, whereupon equitable title therein is transferred.
* Accordingly, even if notice is given to the UDs, legal title will not be transferred until a written assignment is executed.
Lecture Notes.
In a Mortgage-Backed Securitization, how are the Underlying Mortgages transferred from the Originator to the SPV?
Incompletely:
* Firstly, equitable title is transferred to the SPV, with legal title remaining with the Originator on trust for the SPV; then,
* Arrangements are made for a complete transfer contingent on a trigger, e.g. default.
Lecture Notes.
This is done to avoid the very expensive and time-consuming Land Registry fees.
What are the Risks associated with an Incomplete Transfer of Mortgages for the SPV in a Mortgage-Backed Securitization?
-
Vulnerability to disposition of the assets by the Originator to a Good Faith Purchaser who is unaware of the SPV’s rights.
- Remediable by keeping custody of the Charge Certificates with the SPV or its Agent.
-
No Power of Sale prior to the execution of the Deed of Transfer.
- Remediable by using Power of Attorney to exercise the Originator’s Power of Sale.
Lecture Notes.
How may Cashflow Difficulties be mitigated by the SPV?
- Credit enhancement.
- Liquidity support.
What is Credit Enhancement?
A type of facility aimed at compensating shortfalls in bond repayments due to underperformance in the UP.
Effectively, it mitigates credit risk by increasing solvency.
Lecture Notes.
What is Liquidity Support?
A type of facility aimed at compensating shortfalls in bond repayments due to liquidity mismatches in the UP.
Effectively, it mitigates liquidity risk by abetting timely repayment.
Lecture Notes.
What is the Essential Difference between Credit Enhancement and Liquidity Support?
- Credit enhancement increases solvency; whereas
- Liquidity support abets timely repayment.
Lecture Notes.
What are the Different Types of Credit Enhancement?
- Loan facility.
- Subordination, i.e. tranching.
- Over-collateralization.
- Spread account.
- Guaranteed investment contract.
- Derivatives, e.g. interest rate and currency swaps.
Lecture Notes.
Unlike Credit Enhancement, Liquidity Support really only comes in the shape of a loan facility
What is Over-Collateralization (OC)?
Deferred consideration, wherein the SPV withholds a portion of the purchase price as a credit buffer, and pays this sum at the transaction’s conclusion.
It is good practice to place the relevant sum in a trust.
Lecture Notes.
How would an Over-Collateralization be structured using a Trust?
Title in the UP would vest in a Trustee, with both parties as its Beneficiaries:
* The SPV’s entitlement would be whatever is necessary to service its debt; and
* The Originator’s entitlement would be whatever remains therefrom.
Lecture Notes.
What is a Spread Account?
A cash reserve funded by excess cashflow.
Lecture Notes.
What is a Guaranteed Investment Contract (GIC)?
An insurance instrument that ensures Bondholders will receive interest and principal payments in case of cashflow irregularities.
When are Derivatives, like Interest Rate and Currency Swaps, used?
When the debt issued has a different interest basis or currency from that of the underlying receivables.
Lecture Notes.
What may the Credit Enhancement Documentation (Agreements and Provisions) address?
- Tranching provisions.
- Subordinated debt (term facility).
- Insurance polic(ies), monoline or otherwise.
- Letter(s) of credit.
- Ranking and priority vis-à-vis Bondholders.
- Subrogation rights.
- Utilization rights.
This is a non-exhaustive list.
Lecture Notes.
What must a Liquidity Support (Facility) Agreement address?
- T&Cs.
- Timing, receipt, and repayment of Drawdowns (particularly if Swaps are involved).
- Potential rating downgrades of the Provider.
Lecture Notes.
Special emphasis should be placed on Purpose, Utilization, and Conditions of Utilization clauses, given that Liquidity Support is supposed to abet timely repayment rather than bolster credit.
How does Subordination act as a form of Credit Enhancement?
- Each subsequent Class credit-enhances the last by acting as a barrier against credit-related losses; with
- The junior-most Class credit-enhancing the entire deal given its vanguard positon.
Lecture Notes.
A provision effecting subordination as so described is called a Waterfall Clause.
How can Tranching be used to extract Surplus Profits from the Underlying Portfolio by the Originator?
Class X Notes, which are notes that:
* Comprise a tiny proportion of principal; but
* Whose interest is variable; and
* Contingent upon surplus profits generated per quarter.
Naturally, the Originator will hold these notes.
Lecture Notes.
In terms of Servicing the Debt, how may Tranching prove problematic?
Restructuring would become a balancing act between the interests of different Bondholders.
Lecture Notes.
For example, Change X may prejudice the interests of interest-only Bondholders vs. principal-only Bondholders.
Are the SPV’s Bondholder’s Secured?
Yes. The SPV will transfer any security and guarantees received from the Originator to a Trustee who will hold them for the Bondholders’ benefit.
Any anciliary assets, liquidity support, will also be transferred.
P. 750.
The providers of the liquidity and credit enhancement facilities will also be Beneficiaries to this Security Trust.
Regarding Creditor Priority, relative to Bondholders, where do Credit Enhancement and Liquidity Support providers rank?
Below Bondholders, or at the very least, the Senior Bondholders.
P. 764
Why is the Appointment of an Administrative Receiver convenient for the Security Trustee, and by Extension, the Bondholders?
An Administrative Receiver:
* Owes its primary obligation to the Security Trustee;
* Acts on its instruction;
* Oversees the business and all security-backed assets;
* Blocks the subsequent appointment of an Administrator.
P. 766-770.
After the Sale, to what extent is the Originator involved with the Underlying Portfolio?
It may act as either the UP’s:
* Administrator; or
* As a Creditor of the SPV if OC was used.
Textbook – P. 750.
It is common for the Originator to maintain an association by assuming the role of Administrator, chiefly because it wishes to maintain a commercial relationship with its Debtors and because, for lack of them being given notice, it is still who they must pay to obtain a good discharge.
What governs the Originator’s rights and obligations as Administrator?
The Servicing Agreement.
Lecture Notes.
What are the Originator’s Chief Responsibilities under the Servicing Agreement?
To collect payment from the UDs and otherwise manage the UP in its capacity as a Trustee to the SPV.
P. 750-751.
Monies received should be held in a separate account to prevent issues of commingling and traceability.
How does the SPV protect its Income Stream from the Originator?
By either imposing a trust on the Originator’s general collection account in favor of itself.
Lecture Notes.
Having income directly funneled from the Underlying Debtors to an account in the SPV’s name, although ideal, is problematic because it would likely alert them to a Transfer. Likewise, transferring funds from the Originator’s Collection Account thereto would take days, and therefore, leave the relevant sums subject to insolvency risk in the meanwhile.
What do the Contents of a Servicing Agreement typically pertain to?
- EODs.
- Succession (of the Originator as Administrator).
- Interest rates.
- Administration fees.
- Rights and obligations, e.g. information covenants or segregation of cashflows.
- Guarantees and indemnities.
- Uses of the SPV’s surplus cash.
- Liability for acts and omissions.
- Representations and warranties.
- Arrears and enforcement procedures.
Lecture Notes.
How may the Sale between the Originator and the SPV be Upset?
- Recharaterisation Risk.
- §178 IA 1986: Disclaimer of onerous property.
- §186 IA 1986: Rescission for misconduct.
- §238 IA 1986: Clawback for transacting at an undervalue.
- §239 IA 1986: Clawback for preferential treatment of creditors.
- §245 IA 1986: Clawback for avoiding a floating charge (only relevant for Sub-Participation).
- §423 IA 1986: Clawback for defrauding creditors.
RCR is unlikely for reasons explained in the Loan Transfers Deck.
P. 761; Lecture Notes.
It is critical to note that any provision in the Insolvency Act is only relevant when the relevant company is either insolvent or near insolvency. The lattermost two only warranted mentioned and will not be addressed because of how rare they are.
For RCR, such things as the nature and drafting of the profit extraction mechanism; the Originator’s degree of recourse, i.e. its scope and when it activates; the existence of repurchasing rights (if any), as distinct from an obligation to repurchase following breach of warranty, will be relevant considerations.
What are the Insolvency Act’s Two Tests for Insolvency?
- §123(1)(e), Cashflow Insolvency: Is the Debtor unable to repay liabilities as they fall due?
- §123(2), Balance Sheet Insolvency: Do the Debtor’s liabilities exceed its assets?
§123 – Insolvency Act 1986.
Regarding §123(1)(e), is the Cashflow Test forward-looking?
Yes, meaning it is concerned with both immediately and prospectively payable debts.
BNY v Eurosail [2011] EWCA Civ 22; Re Cheyne Finance [2008] EWHC 2402.
Regarding §123(2), what are the Implications of the Eurosail decision?
- Without good reason to the contrary, assets and liabilities must not be taken at their face values on the balance sheet.
- §123(2) does not mechanically turn on the question of whether liabilities exceed assets.”
- Contingent and prospective liabilities are accounted for by means of valuation, rather than simple aggregation.
- §123(2) is supplementary to §123(1)(e). It covers cases where, although debts are paid as they fall due, it is clear the Debtor will not meet its future or contingent liabilities.
- Audited accounts are a good starting point, but not the be-all-end-all, as commercial considerations are still relevant.
- The more remote a contingent liability and the more distal a prospective liability, the less weighty they become.
Lecture Notes.
The idea of a ‘Point of No Return’ was floated by the Court of Appeal and rejected by the Supreme Court.
What is a Contingent Creditor?
A Creditor whose debt will only become due:
* In an event that may or may not occur; and
* Which is related to an existing obligation.
Lecture Notes.
What is a Prospective Creditor?
A Creditor whose debt:
* Will certainly become due in the future; and
* Arises out of a current transaction or obligation, not a future obligation.
Lecture Notes.
Can a Creditor issue a Bankruptcy Petition on a Contingent or Prospective Liability?
No, namely because the liability would not be immediately repayable.
§268 – Insolvency Act 1986.
What are the Elements of a Bankruptcy Petition?
The Creditor of an unsecured debt of at least £750 must:
* Be owed a liquidated debt that is payable either immediately or at a certain future date; which
* The Debtor is either unable to repay or has no reasonable prospect of repaying at the material time.
Lecture Notes; §267-§268 – Insolvency Act 1986.
Regarding §178, what constitutes Onerous Property?
Property that requires ongoing payments to a counterparty without any corresponding benefit.
That said, what constitutes onerous property varies from case to case.
Re Calisto Property [2004] EWHC 1293 (Ch); Re Capitol Films [2013] EWHC 1313 (Ch).
Regarding §178, how may it upset the Transaction?
The Servicing Agreement, depending on its terms, may be deemed onerous for not rewarding the Originator, resulting in its disposal.
Lecture Notes.
This is undesirable because the UP would have no one to manage it.
Regarding §178, how may a claim be prevented?
Ensuring the Originator is fairly compensated for its role as Administrator.
Lecture Notes.
Regarding §186, what constitutes Misconduct?
Conduct that may have contributed to the Originator’s insolvency or to a Director’s personal gain, such as:
* Fraud.
* Misleading investors.
* Breach of fiduciary duty.
* Fraudulent or wrongful trading.
* Missappropriation of company assets.
* Failure to comply with regulatory requirements.
Re Polly Peck [1998] BCLC 495; R v Grantham [2003] 3 All ER 426.
Regarding §186, how may it upset the Transaction?
It would unwind the transaction.
This also applies to §238, §239.
Regarding §186, how may a claim be prevented?
- Include R&Ws addressing misconduct.
- Conduct thorough due diligence, particularly regarding the Originator’s economic viability, regulatory compliance, and risk management systems.
Lecture Notes.
Regarding §238, what constitutes a Transaction at an Undervalue?
Receiving consideration that is significantly lesser in value relative to what was provided.
§238(4)(b) – Insolvency Act 1986 .
Regarding §238, under what conditions can a Liquidator bring a claim?
If the transaction:
* Was within two years of the insolvency proceedings’ onset and with a connected person;
* Was executed when the Originator was insolvent; or
* Sent the Originator into insolvency.
This also applies to §239.
§240 – Insolvency Act 1986.
The definition of ‘connected person’ can be found under §249 and §435, and for all intents and purposes, is supposed to be the SPV, although whether it satisfies the definition in practice is a separate question.
Regarding §238, what may trigger a claim?
Over-Collateralization, as the deferred consideration structure may seem a transaction at an undervalue.
Lecture Notes.
Regarding §238, when will the Court not pursue a claim?
When it is satisfied that the Originator:
* Entered into the transaction in good faith and to carry on its business; and that at the time,
* Had reasonable grounds for believing that the transaction would benefit the company.
§238(5) – Insolvency Act 1986.
Regarding §238(5), what factors will the court consider?
- The Originator’s financial position before entering the transaction.
- The benefit, or reasonable expectation thereof, to be realized by entering into the transaction.
- The financial, operating, and market risks undertaken by entering into the transaction.
- The consequences of not entering into the transaction, particularly in light of alternatives.
- The position of the Originator’s existing, prospective, and contingent creditors before and after the transaction.
Lecture Notes.
Regarding §238, how likely is a claim by the Liquidiator to succeed?
Unlikely. The parties will likely have arranged to settle the over-collateralized sum in future, thereby largely disarming it.
P. 762.
Penn states that although the Originator will not receive a price equal to the UP’s face value, it will receive a price that is, “calculated on the basis of the present value of the assets,” which incorporates the over-collateralization discount, and therefore, escapes §238.
Regarding §238, how can using a Trust help disarm the claim?
- It would remove the claim from the Originator’s estate; and
- Clarify the nature of its interest therein.
Lecture Notes.
Regarding §239, what constitutes Preferential Treatment?
- The placing of a Creditor into a better position than it would have otherwise enjoyed during insolvency;
- As a result of the Debtor having deliberately done, failed to do, or suffered something.
Lecture Notes; §239 – Insolvency Act 1986.
Regarding §239, what may trigger a claim?
The perception that the SPV’s Bondholders received favorable treatment relative to the Originator’s other Creditors.
Regarding §239, how likely is a claim by the Liquidiator to succeed?
Unlikely. It is improbable that either:
* The SPV will be the Originator’s Creditor at the material time; or
* That the latter will be motivated to improve the former’s position in insolvency.
Lecture Notes.
That said, under any structure where the SPV can become the Originator’s Creditor, e.g. Sub-Participation or a revolving purchase structure, §239 should be considered much more closely.
To ensure Insolvency Remoteness, how should the SPV be structured?
- Contractually and constitutionally restrict business activities, especially indebtedness creation.
- Independent Board of Directors (to decrease Peircing Risk).
- No employees, with all activities being performed through Agents (minimize legal exposure).
- No parent companies, to minimize risk of substantive consolidation.
- Limit recourse against the SPV.
- Omnilateral use of Non-Petition Covenants.
- Clearly identify and curate the SPV’s Creditors.
- Regulate Creditors’ priority of claims using Inter-Creditor Agreements, subordination, etc.
Lecture Notes.
The purpose is to create an entirely separate corporate entity with minimal organisational ties to the Originator. Also, Peircing Risk is the risk of the court peircing the corporate veil.
How should a Limited Recourse Provision be Drafted?
To limit Creditors’ claims against the SPV to the assets secured in their favor. Alternative drafting risks barring Creditors from ever triggering their security.
Lecture Notes.
This risk arises from the fact that security attaches to obligations, and in this case, to trigger the security, Creditors would have to claim for the full debt. Thus, prohibiting them therefrom would effectively also prohibit them from enjoying their security.
What must the Trust Deeds address?
Bond Trust:
* T&Cs of the Bond Issuance, i.e. classes, interest rates, entitlements, enforcement, etc..
* Trustee’s rights, obligations, and liabilities.
UP Trust:
* Use and transfer of proceeds from receivables.
* Trustee’s rights, obligations, and liabilities.
Share Trust:
* For whom the SPV’s shares are held on behalf of.
* Trustee’s rights, obligations, and liabilities.
Lecture Notes
What must the Security Documentation address?
- Nature of the security, e.g. fixed or floating charge.
- From whom and by whom it is held, and the relevant interests.
- Perfection issues.
- Governing jurisdiction.
Lecture Notes.
What must the Underwriting Agreement address?
- T&Cs.
- Pricing.
- Nature of underwriting obligation, i.e. best efforts or full underwriting.
- Force majeure.
Lecture Notes.
Special emphasis should be placed on CPs, which should extensively detail the necessary collateral, credit enhancement, consents, credit ratings, and authorizations and licences necessary to issue the debt and administer the transaction.
Regarding the Service Agreement, what should be done if the Originator’s assets or business are so complex or unique that a ready Successor would not be available?
On Day 1, an entirely independent successor should be:
* Created and enabled to inherit all the Originator’s rights and assets;
* Insofar as they are needed to carry on its business in case of insolvency.
Lecture Notes.
Only very rarely will this be a consideration.
