I'm researching the area of whole business securitisation for an article, and understand that to date this is largely an English technique for securitising cash flows from certain types of businesses, mainly due to the ability of holders of floating charges to block the appointment of an administrator, thus giving them effective control of the business in the event of a default occurring.
In Ireland the current legislation does not give security holders the same right, but the court will only appoint an administrator if the company is unable to pay it's debts and if a petitoner proves that there is a reasonable prospect of survival of the company as a going concern. Since whole business transactions have business and operational risks factored into the credit enhancement and liqiudity facilities, i believe that it will be difficult for a busines which has it's cash streams securitised to be on the brink of insolvency and even if it was this would be due to extraordinary business and operational risks as oppossed to structural deficencies in the transaction. In this situation it would be virtually impossible for an outside criditor to prove that it could survive as a going concern.
The point that i'm trying to raise is that even in the absence of creditor friendly laws in Ireland, the appointment of an administrator is difficult and would be even more difficult in a whole business transacationl. From my research i have learned that transactions in England provide for trade creditors and employees to be paid during administrator recevivership period.
Does anyone think that it would be possible to construct a transaction for a business which has a strong history of stready cashflows and a strong market position, despite the ability of it's secured creditors to veto an administrator, but where the appointment of an administrator in the first place is difficult ?
I would be extremely interested in hearing any suggestions on how to structure whole business transactions in this situation.
Noman
Posted on Feb 11, 2003, 8:01 PM from IP address 213.202.163.12