Security trustee
|
The Law and Lore of Repackaging
|
Security trustee
/sɪˈkjʊərɪti/ /trʌsˈtiː/ (n.)
One who holds the security in a repackaging programme for the benefit of itself and the other secured parties.
Security trustees are inert bodies at the best of times, but are especially so when it comes to repackagings. They are like Vogons. They would not, as Douglas Adams once put it (about Vogons)
“... even lift a finger to save their own grandmothers from the Ravenous Bugblatter Beast of Traal without orders signed in triplicate, sent in, sent back, queried, lost, found, subjected to public inquiry, lost again, and finally buried in soft peat for three months and recycled as firelighters.”
The security trustee equivalent of orders signed in triplicate, sent in, sent back, queried, lost, found, subjected to public inquiry, lost again, and finally buried in soft peat for three months and recycled as firelighters is “subject to being satisfactorily indemnified, prefunded and/or secured before being obliged to take any action whatsoever” and this is the standard operating procedure for any trustee. It is a good way of ensuring one appears to be there, doing a sound job, protecting everyone’s interest, whilst not really being obliged to to anything beyond collecting a fee.
We do not scold this approach: we endorse it. The security structure of a repackaging programme is a sinecure, designed only to save the blushes of learned counsel should the limited recourse ringfencing that they grandly erected around each series turns out not to work.
we are less concerned with normal, non-repackaging style, secured bond issues — outside the wider securitisation world they are pretty rare — but suspect the same goes. Trustees do not expect to have to do anything, and generally speaking they will be right.