The snippy guide to financial services lingo.™
The true sale analysis requires that a purchaser receiving an asset has no contractual restrictions on its right to deal with their own property as any legal and beneficial owner would. In particular the selling party should not be able to control the asset, and should have no right to require its redelivery or future repurchase.
This is to ensure that in the vendor’s insolvency there is no chance of the vendor’s liquidator challenging the transfer of the asset to the purchasing party on the grounds that it was not a true sale for accounting purposes, and recharacterising it as a loan or an unperfected pledge or other form of security which may be treated less favourably in the distribution of insolvency proceeds.
A true sale opinion is a legal opinion from a law firm (ideally a magic circle one) confirming that a disposal or title transfer of collateral amounts to a true sale. This may segue into a tedious discussion about the technical legal meaning of the word “equivalent”.