The Securitisation Law Review: USA
The modern US securitisation market is widely considered to have emerged as a product of the federal government's involvement in the housing market following the Great Depression. The US federal government adopted the National Housing Act of 1934 and established the Federal National Mortgage Association (FNMA, or Fannie Mae) in 1938. Fannie Mae's purpose was to 'establish secondary market facilities for residential mortgages, to provide that the operations thereof shall be financed by private capital to the maximum extent feasible',2 which it did by purchasing mortgage loans from lenders, thereby freeing capital that could be used to make more loans. By 1970, in addition to Fannie Mae, the US federal government had established other government-sponsored enterprises (GSEs) that were critical to the rise of modern securitisation in the United States: the Federal Home Loan Mortgage Corporation,3 the Federal Home Loan Bank System, and the Government National Mortgage Association (GNMA, or Ginnie Mae). It was Ginnie Mae that issued the first asset-backed security, pooling the individual mortgage loans together and in 1970, selling securities backed by the mortgaged properties (mortgage-backed securities, or MBSs).4
After 1970, the securitisation market expanded rapidly alongside the housing market. More complex securitisation structures were introduced, and while 'GSEs dominated the MBS market for nearly twenty years'5 from the first issuance in 1970 to around 1990, the 1990s saw the introduction of private actors into the securitisation market and the first offerings of 'private-label' or 'non-agency' MBSs (those offered by private institutions, as opposed to those issued and guaranteed by GSEs and known as 'agency' MBSs). This expansion was another critical development in the development of securitisation in the United States. By their peak in 2006, private-label MBS issuances were valued at approximately US$900 billion,6 and the value of the MBS market as a whole was in the trillions of dollars.
While MBSs dominated the securitisation market from its inception until the early 2000s, during that period in the United States, other forms of securitisation developed and continued to expand. The mid-1980s saw the introduction of the first 'asset-backed securities' (ABSs), a term used generally to refer to the securities issued in a securitisation of asset pools consisting of loans and debt obligations other than mortgages.7 While initially a smaller portion of the market than MBSs, ABS issuance did increase markedly after its inception in the 1980s and grew rapidly, along with the rest of the securitisation market, in the early 2000s.
Despite the setbacks resulting from the financial crisis in 2008, securitisation in the United States remains an attractive form of financing for borrowers in various industries, as the cost of gaining liquidity is often lower than that of traditional lending. Both investor concerns and the post-crisis regulatory framework in the United States have required parties to continue to develop new structural features. Nonetheless, issuers and underwriters continue to develop new structures to apply to novel asset classes, as well as applying modified versions of pre-existing structures to traditional ABS assets, such as mortgage, auto and credit card loans. In 2020, important developments in the market occurred due to the effects of the covid-19 pandemic, but the securitisation market has shown significant resiliency and continued to operate effectively throughout 2020 and 2021, with 2021 being a record year in recent years in terms of deal volume and innovation.
ii Common structures
There are two main structures employed in securitisations. The first structure is commonly used in MBSs, though some other asset classes also employ this method. In this structure, a wholly-owned subsidiary of the sponsor8 or originator of the assets, known as a depositor,9 acquires or receives the assets that will be securitised. The depositor transfers the assets to a trust that is also a wholly-owned subsidiary of the sponsor or originator, and the trust then issues notes10 backed by the assets.
The second structure is more likely to be found in the securitisation of 'esoteric'11 assets and is gaining increased use across the market. The key difference between the two structures is that the latter does not include the intermediate step of transferring to a depositor. Instead, the issuer of the notes is a wholly-owned subsidiary of an entity that manages the assets on behalf of the owners of the assets (typically, the manager or parent). The owners of the assets, known as asset entities, are typically wholly-owned subsidiaries of the issuer. The notes issued then are backed not by the assets themselves, but by the equity of the asset entities that own the assets. Some transactions also have a guarantor that is a direct subsidiary of the manager and direct owner of the issuer. The guarantor grants a security interest in its equity interest in the issuer and guarantees the issuer's and asset entities' obligations under the transaction documents.
i Risk retention
In response to the financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act)12 was enacted in the United States in July 2010. The Dodd-Frank Act increased regulation of the securitisation market in many respects, including the implementation of new credit risk retention rules in Regulation RR, 17 CFR Part 246. The rules were intended to promote alignment of the interests of sponsors and investors by requiring the sponsor to maintain 'skin in the game'; that is, the sponsor must retain an economic interest in the credit risk of the securitised assets for a certain period. In 2014, the Securities and Exchange Commission (SEC) and five other federal agencies jointly adopted the final rules, requiring the sponsors of ABSs to retain not less than 5 per cent of the aggregate credit risk of the assets being securitised (the US Risk Retention Rules).13 The US Risk Retention Rules became effective with respect to residential MBSs on 24 December 2015 and with respect to all other asset classes on 24 December 2016. The Rules were described as the 'single most important part of the bill',14 and were designed to be a fix for certain perceived flaws in MBSs prior to the financial crisis. In February 2018, the U.S Court of Appeals for the District of Columbia Circuit ruled that an open-market CLO manager is not a 'securitiser' and therefore, the Dodd-Frank Act does require CLO managers of open-market CLOs to comply with the US Risk Retention Rules.15
An ABS is defined in Section 3(a)(79) of the US Securities Exchange Act of 1934 as 'a fixed-income or other security collateralised by any type of self-liquidating financial asset (including a loan, a lease, a mortgage, or a secured or unsecured receivable) that allows the holder of the security to receive payments that depend primarily on cash flow from the asset'.16 This definition is broad enough to encompass some securities that may not have traditionally been considered ABSs, but narrow enough to exclude certain types of securitisation transactions, including many that rely on how actively the underlying assets are managed and commercialised rather than a static pool of self-liquidating assets.17
Because of the difference in interpretation and lack of case studies, considerable uncertainty exists as to whether certain securities constitute ABSs for the purpose of the US Risk Retention Rules, in particular as regards more esoteric asset classes. When compliance is required (or undertaken in the absence of certainty as to the requirement for compliance), the US Risk Retention Rules provide that the retained interest may be held as an 'eligible horizontal residual interest'18 or 'eligible vertical interest'.19 The risk retention requirement may also be satisfied by a combination of both horizontal and vertical interest.20 Each method requires retention of at least 5 per cent of the nominal value of the interests in the securitisation.21 The US Risk Retention Rules also require certain disclosures regarding the value of the retained interests and, in the case of an eligible horizontal residual interest, the sponsor's methods of valuation, including the default and payment rate assumptions.22 An eligible horizontal interest is the more attractive option when the credit enhancement required to be maintained to support the rating of the securities requires the sponsor, through the issuer, to retain an interest that is already in excess of 5 per cent of the nominal value of each class issued in the securitisation. An eligible vertical interest may be a less attractive opinion as it would require the sponsor to retain a 5 per cent interest in the more senior class of securities issued by the issuer that could otherwise have been sold to third parties (whereas the eligible horizontal interest would already have been held as noted above).23
ii Tax issues
Tax characterisation of the notes issued in a securitisation
The notes issued in a properly structured securitisation will generally be treated as debt for US federal income purposes so long as the beneficial owner of the notes is not the issuer or any of its affiliates. The benefits of treatment as debt are twofold:
- the issuer's interest expenses are generally deductible; and
- the interest payments paid to foreign noteholders will generally not be subject to withholding tax.
There are, however, no clear rules for making the distinction between debt and equity; instead, the determination is based on the balancing of a number of factors.24 In 1994, the Internal Revenue Service issued Notice 94-47,25 which laid out the principal factors for making the determination, noting that none is dispositive and that all facts and circumstances must be considered. In general, the factors relate to how much the rights of the noteholders resemble the rights of typical creditors. It is also necessary to look to case law to guide the interpretation of these factors.
In addition, in 2016, the Internal Revenue Service issued final regulations under Section 385 of the Internal Revenue Code26 that may result in recharacterisation of debt issued by US entities owned by multinational parent entities (whether US or foreign-based), with some exceptions. In general, Section 385 requires documentation of factors that are used to determine characterisation, such as the issuer's obligation to pay a sum certain and the reasonable expectation of the ability to pay. Compliance with the new requirements does not guarantee characterisation as debt, but non-compliance is likely to result in characterisation of equity.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (FATCA)27 was signed into law as part of the Hiring Incentives to Restore Employment (HIRE) Act,28 requiring that 'foreign banks . . . disclose their US account holders to the US Government or face significant penalties'. Pursuant to FATCA, if a foreign entity or financial institution does not comply with FATCA requirements, a 30 per cent withholding tax will be applied to certain US-source payments, including, in general, payments of interest on the notes issued in a securitisation.
iii Regulatory compliance
The Department of Justice, Internal Revenue Service, Department of Treasury and the Financial Industry Regulatory Authority, among others, all have anti-money laundering-related laws or regulations applicable to financial transactions and financial institutions. These regulations primarily relate to identification of sponsor,29 record-keeping30 and anti-money laundering compliance policies.31 Securitisation transaction documents typically require that the sponsor demonstrates that it complies with all applicable anti-money laundering laws, regulations or procedures.
The Office of Foreign Assets Control (OFAC) of the US Treasury Department administers and enforces economic and trade sanctions against foreign countries, regimes, and other international actors based on US foreign policy and national security interests. There are several sanctions programmes that vary as to the scope and targeted group, as well as sanctions against specific individuals. Securitisation transaction documents typically require that the sponsor demonstrates that it is not the target of any OFAC investigations and is not in violation of any OFAC sanctions. It is also good practice for entities conducting non-US business to have OFAC sanctions compliance policies.
There is no law or regulation that mandates the jurisdiction that the issuer is formed in or governs the transaction documents; however, commonly, the issuer is formed in Delaware and the transaction documents are governed by the laws of New York. The reasons for choosing Delaware and New York, among others, are 'the well-developed and therefore more predictable legal framework in these jurisdictions' and 'the sophistication of the judiciary in these states.'32 These states also have laws that are beneficial for securitisations. For example, the Asset-Backed Securities Facilitation Act, which Delaware enacted in 2002, effectively deems that all sales of assets as part of a securitisation are true sales.33 Another example is that regardless of whether the transaction involves parties or assets in New York, New York law allows transaction parties to choose New York law to govern transactions valued at US$250,000 or greater34 and to enforce rights and obligations of transactions valued at US$1 million or greater.
Security and guarantees
The issuing entity may have to take steps to establish that the investors' security interest in the securitised assets is superior to all other claims on the assets (i.e., perfection). If the assets are real property subject to recorded mortgages, no additional steps have to be taken, as recordation of a mortgage is sufficient to achieve a perfected lien. For most other types of collateral, the method of achieving a perfected security interest is pursuant to Article 9 of the Uniform Commercial Code.35 This requires the filing of a financing statement,36 a standardised form, usually with the Secretary of State or similar municipal agency of the state in which the issuing entity was organised.37 The financing statement must give the legal name and address of the 'place of business'38 of the issuing entity (in this case, the debtor)39 and the trustee, on behalf of the noteholders (in this case, the Secured Party).40 The financing statement also requires a description of the assets on which there is a lien. The most common description is 'all assets of the debtor,' which may be additionally described as 'currently owned or after-acquired.' Once the financing statement is filed, the lien is perfected.41 Real property and other collateral types are subject to varying local rules.
Priority of payments and waterfalls
The most common form of cash management is to collect the funds generated by the assets in one or more bank accounts established in the issuer's name and subject to a deposit account control agreement. These agreements permit the secured party (in this case, typically the trustee) to direct the deposit bank regarding the deposited funds.42 In some instances, the bank accounts may be established in the secured party's name, in which case no account control agreement is needed. If there are multiple accounts for the deposit of funds, the funds are then transferred to, and distributed from, a single account.
In addition to the accounts described above, the order in which funds are distributed (the 'waterfall' or priority of payments) may reflect distributions to reserve accounts if they are paid over time, using funds that have passed through the waterfall, up to an amount set out in the transaction documents.43 Reserve accounts are generally established to ensure that sufficient funds are available for certain payments due as they become due, but can also be for payments required upon certain occurrences described in the transaction documents. Payments for which funds may be reserved include those for the payment of interest on the notes, essential expenses and payments required upon the occurrence of certain events, such as a breach of a financial covenant. In each case, reserve accounts add stability to the transaction, whether that is in providing assurance that interest payments will be timely, as with an interest account, or that operations will not be disrupted because of insufficient available funds. The waterfall may also reflect multiple tranches of debt. Debt is typically divided into tranches to allocate risk among the noteholders such that the lowest-rated tranche absorbs losses first (i.e., credit-tranched). Debt can also be time-tranched, such that funds are distributed to different tranches at different points in the waterfall.
For example, a waterfall reflecting two tranches of debt and an interest reserve account may include language indicating that funds will be deposited in the following order prior to an event of default under the transaction documents or an event that triggers the acceleration of the debt (a Rapid Amortisation Event): (1) to the interest payment account for each class of senior notes, then (2) to the interest payment account for each class of notes that are subordinated notes, and then (3) to an interest reserve account. Following an event of default or a Rapid Amortisation Event, the same waterfall may include language indicating that funds will be distributed (1) to the senior notes until the outstanding principal amount of each such class will be reduced to zero, and then (2) to the subordinated notes until the outstanding principal amount of each such class will be reduced to zero. In both scenarios, the subordinated notes will be paid after the senior notes. However, in the second scenario, there is a risk that the subordinated notes may receive only partial payment, or even no payment, since the available funds are limited to what is left after the senior notes have been paid in full.
Isolation of assets and bankruptcy remoteness
One of the key features of a securitisation is that the assets are sold or contributed to one or more bankruptcy-remote special purpose vehicles (SPVs) that is a subsidiary of the originator or owner of the assets. The bankruptcy-remote nature of the SPVs and the sale or contribution of the assets results in protections for both the originator and investors. The benefit for the originator is that most losses relating to the securitisation can only be recovered from the securitised assets and the related cash flows, protecting the originator's assets. The benefit for the investor is that if the originator is subject to an insolvency proceeding, the securitised assets will not be considered part of the company's estate that can be liquidated for the payment of creditors.
i SPV formation
To provide these benefits, the SPV that receives or purchases the assets must be organised to be separate from the originator of the assets to ensure that the SPV will not be substantively consolidated with its parent company or the asset originator. The SPV may be any kind of legal entity, but, regardless of legal form, the SPV's governing documents must include certain bankruptcy-remote and special-purpose provisions of the SPV. These provisions limit the SPV's activities to those related to owning and holding the securitisation assets and performing obligations under the transaction documents. These provisions typically include the following items.
The SPV must:
- maintain separate books and records;
- pay liabilities and expenses from its own funds;
- maintain separate bank accounts;
- conduct business in its own name; and
- conduct business with the parent company and its affiliates or asset originator on an arm's-length basis.
The SPV is prohibited from:
- engaging in business not expressly contemplated under the transaction documents;
- formation of additional subsidiaries;
- engaging in activities other than owning, financing and collecting on or sale of the underlying assets;
- commingling of assets with other entities; and
- providing credit to satisfy the obligations of any other entity.
Some transactions require one or more independent managers or directors, often engaged from a third-party service provider and paid a nominal fee. Before undertaking certain 'material actions', the independent managers or directors must vote in favour of undertaking these actions, principally the filing, consent or support of an insolvency proceeding.
ii Sale or contribution of assets
The asset originator transfers the assets, by sale or contribution, to the SPV. The sale or contribution agreement must be structured such that the transfer will be legally recognised as a 'true sale' or 'true contribution', as applicable, to ensure that the transferred assets are considered the SPV's property and not the originator's. The analysis of whether a transfer is a true sale includes consideration of whether the assets were sold without recourse to the transferor and for fair value on terms that reflect an arm's-length transaction. The requirements for establishing a true contribution are simpler: the SPV must be solvent and the contribution must be reflected in the SPV's capital account. In addition to being a simpler bankruptcy analysis, contributions are more flexible because the transfer can be effected without consideration, while a sale requires payment for the purchase of the assets.
Despite its argued role in the financial crisis, the securitisation market has grown steadily since the end of the financial crisis, if in a different form.44 Significant kinds of new asset classes and securitisation methods have arisen in recent deals and are showing steady and healthy growth. The recent expansion of the securitisation market in the United States to include novel and non-traditional asset classes demonstrates resilience in the concept of securitisation as a financing method. As the markets have recovered, regulatory frameworks have evolved to help align the interests of investors and originators. The remainder of this chapter illustrates a number of non-traditional asset classes prevalent in securitisation in the United States.
i Solar securitisation
Recent developments have paved a path for financial innovation in the renewable energy industry. Solar securitisations are at the centre of this trend.45 Solar providers have developed four primary arrangements with consumers: leases, loans, power purchase agreements and property-assessed clean energy (PACE) loans.46
Loans are one of the newest forms of residential solar finance.47 Rather than offer leases, solar providers grant loans to homeowners, allowing them to purchase the system and then make interest payments until the maturity of the loan. Solar power purchase agreements create arrangements pursuant to which property owners purchase solar power generated by third-party-owned panels installed on their property for a fixed price and period.48 Solar PACE loans offer an alternative solution to solar financing.49 Municipalities that offer solar PACE programmes allow homeowners to install solar panels without making an initial down payment. Such municipalities cover the cost of installation by issuing municipal bonds secured by the home, which are paid back by customers through annual tax assessments.50 Each of these asset types has been securitised in recent years and securitisations are often collateralised by more than one type of solar financing arrangement.51
While the solar securitisations share many similarities with other securitisations, a key distinguishing feature is the crucial role of tax equity investors in many solar securitisations, where tax credits also play a role in the underlying economics, leading to a complex structure in which another class of fixed income investors is involved in the process.52
ii Wireless tower securitisations
Wireless tower securitisations, which are backed by wireless towers and the related wireless carrier contracts, have significantly increased since 2009, a trend that is expected to continue.53 This is partially a result of the increased need for wireless infrastructure in the wake of continuing – and increasing – demands for wireless services and rapid advancements in wireless technology, which require increased wireless infrastructure. Such securitisations are an attractive asset class to investors, in part because of the likelihood of stable cash flows, since wireless towers are critical to the operations of the wireless carrier tenants.54 In 2020 and 2021, we have seen increased use of wireless tower securitisations in the context of mergers and acquisitions transactions, with the technique being used for acquisition financing.
iii Whole business securitisation
Whole business securitisation is a growing segment of the securitisation market for certain types of business, such as franchised operators and businesses with extensive pools of intellectual property royalties, among other similar structures. As of August 2019, whole business securities issuances were more than US$6.9 billion.55 While through the first half of 2020, issuances of whole business securitisations within the restaurant and retail sector were down, citing economic constraints due to pandemic lockdowns and increased unemployment,56 we saw the sector showing strong improvement in the second half of 2020. A whole business securitisation is backed by the cash flows of an operating company57 rather than simply financial assets, as in traditional ABSs. In practice, this means transferring the key intellectual property and revenue-producing assets of the company into a securitised structure, with the existing management team managing the securitised assets. Whole business securitisation can be said to have a hybrid nature combining both secured corporate financing and an asset securitisation.58 Candidates for this type of financing typically hold intellectual property or other recurring contract revenue that can be collected on a stable and predictable basis over a considerable period.
A unique feature of whole business securitisation is the originator's ongoing involvement in managing the business.59 In a whole business securitisation, the income stream of a department or the company as a whole is being securitised, compared with traditional securitisations, in which a specific pool of assets is isolated and then securitised. Substantially all the income-generating assets, often agreements pursuant to which the company receives payment, are contributed to one or more asset entities. As with other securitisations of other asset classes, the issuer typically retains the parent holding company or one of its affiliates as the servicer or manager of the assets after the asset transfer. However, rather than merely collecting on the receivables, as in a more traditional securitisation, the manager in a whole business securitisation is actively involved in managing the assets and thereby ensuring the ongoing generation of cash flows. Most whole business securitisation structures employ carefully constructed backup management mechanics to avoid interrupting the performance of the company and the deal in the event of a termination of the manager.
iv Digital infrastructure
Digital infrastructure securitisation assets include data centres, distributed network and antennae systems and fiberoptic networks, and are likely to proliferate in kind. With the global datasphere expected to grow from 45 zettabytes in 2019 to 175 by 2025, the need for digital infrastructure is expected to continue to increase.60 The rise in data demands caused by the covid-19 pandemic, as well as the increased development of emerging technologies such as 5G wireless, augmented reality and autonomous cars, will contribute to this growth.61 The projected rise in data usage, the financial stability of tenants leasing digital infrastructure, and the reliable cash flow on medium to long-term contracts lends to the attractiveness of this asset and also poses a low risk to investors.62
Data centre securitisations are backed by customer payments for access to space and network services at build-to-suit and colocation facilities, tenant lease payments from other types of facilities – such as managed service data centres – and related real property. Because of the high cost associated with building and maintaining a data centre, many companies have opted to use third-parties for these services. For customers who process large amounts of information, data centres are invaluable, as they rely on them to provide a safe and secure facility equipped with reliable power and network capabilities.63 This asset class is attractive to investors because of the long average contract terms, the importance of these leases to the tenant's business and the tenant's generally high credit quality.64
Distributed antenna systems (DAS) comprise equipment attached to buildings and existing infrastructure to increase user data capacity in congested areas.65 With the emergence of 5G wireless connections, this system of antennas complements existing cellular towers to bring higher quality wireless service.66 Tenants and licensees utilising these network services generally consist of large telecommunications companies with excellent credit giving relative assurance of steady cash flow.67 To date, DAS securitisations have been backed by customer payments pursuant to licences for access to the DAS equipment and agreements. The agreements that allow the DAS equipment owner to attach DAS to private property, such as hotels, and to municipal property, such as utility poles, are also contributed to the securitisation.68
Digital infrastructure securitisations – especially those with fibre network assets – can benefit from innovative security packages, including qualifying for 'transmitting utility' status under the relevant Uniform Commercial Code of the state where the fibre network is located.69 In such an instance, in States where the relevant provisions of the Uniform Commercial Code have been adopted, there is typically a specific filing office for transmitting utilities, which in most cases is the central filing office for the state, with some variation among states.70 This 'transmitting utility' method of perfection simplifies dealing with complex real- and personal-property analysis and complex fixture networks.
1 Michael Urschel is a partner and Kathryn Weiss and Charlene Yin are associates at King & Spalding LLP. The authors would like to thank King & Spalding summer associates Zachary Strother and Jeff Zhou for their assistance in writing this chapter.
2 12 U.S.C. §1716.
3 Known as FHLMC, or Freddie Mac.
4 Segoviano, et al., Securitization: Lessons Learned and the Road Ahead, Working Paper No. 13/255, International Monetary Fund (19 December 2013), 54.
5 Gilreath, The Culprit of the Great Recession: A Detailed Explanation of Mortgage-Backed Securities, Their Impact on the 2008 Financial Crisis, and the Legal Aftermath, 13 J. Bus. & Tech. L. 319 (2018), 326.
6 id. at 324.
7 Segoviano, 8.
8 The sponsor is the party who 'organizes and initiates' the transaction. 17 CFR §229.1101(l). Often the sponsor is not a direct party to the transaction, but is, instead, an affiliate of transaction parties.
9 17 CFR §229.1101(e).
10 The 'issuing entity' of the notes is either the trust, as in the first structure, or another entity that owns or holds the assets. 17 CFR §229.1101(f).
11 The underlying assets in an esoteric securitisation include cell towers, billboards, franchise royalties and tax liens.
12 Pub.L. No. 111-203, 124 Stat. 1376-2223 (2010).
13 Securities and Exchange Commission, Credit Risk Retention, Rel. No. 34-73407 (10 October 2014), 27.
14 Floyd Norris, Mortgages Without Risk, at Least for Banks, New York Times, 28 November 2013, quoting former Senator Barney Frank.
15 Michael Urschel, Risk Retention Update: Spring 2018 (26 March 2018). https://www.kslaw.com/attachments/000/005/731/original/ca032618.pdf?1522090057 (last accessed 4 October 2020).
16 Securities Exchange Act of 1934 §3(a)(79), Ch. 404, title 1, Sec 3., 48 stat. 881 (codified at 15 U.S.C. §786(a)(79) (2019)).
17 Ryan D. McNaughton, Ch. 12A. Cellular Tower Securitization §12.04A in Securitizations: Legal and Regulatory Issues (Patrick D. Dolan) ed., 2018.
18 An eligible horizontal residual interest is an 'interest in a single class or multiple class'. 17 CFR §246.2.
19 An eligible vertical interest is an interest in each class issued. id.
20 17 CFR §246.4(a)(3); an eligible cash reserve account held by the trustee in cash or cash equivalents can also be employed. 17 CFR §246.4(b).
21 17 CFR §246.4(a)(1)-(2).
22 17 CFR §246.4(c).
23 See, however, Section V.ii for an example of a securitisation that is not subject to the US Risk Retention Rules.
24 Several factors for distinguishing debt from equity are laid out in Fin Hay Realty Co. v. United States, 398 F2d 694.
25 1994-1 C.B. 357.
26 26 U.S.C. §385.
27 26 U.S.C. §1471-1474.
28 Pub. L. 111-47, 124 Stat. 97 (2010).
29 See FINRA, Rule 2090 (2012), FINRA, Rule 2111 (2012) and Pub. L. 107-56, among others.
30 See 31 U.S.C. 5311 et seq. and SEC Rule 17a-3(a)(17), among others.
31 See FINRA, Rule 3310 and 31 CFR §1023.210, among others.
32 Daniel Wolf, Delaware v. New York Governing Law, Harvard Law School Forum on Corporate Governing and Financial Regulation (2014). https://corpgov.law.harvard.edu/2014/01/02/delaware-vs-new-york-
governing-law/ (last visited on 19 September 2019).
33 'Any property, assets or rights purported to be transferred, in whole or in part, in the securitization transaction shall be deemed to no longer be the property, assets or rights of the transferor.' 6 Del. C. §2703A(a)(1).
34 N.Y. GOL §5-1401.
35 See, e.g., N.Y. UCC Law §9.
36 UCC §9-102(39).
37 UCC §9-301(1).
38 UCC §9-307.
39 UCC §9-102(28).
40 UCC §9-102(73).
41 UCC §9-309.
42 See UCC §9-104.
43 Reserve accounts may also be funded at closing, in which case, they will not appear in the waterfall.
44 The Economist, It's Back, 11 January 2014; The Economist, Back from the Dead, 11 January 2014. See also Securities Industry and Financial Markets Association, US ABS Issuance and Outstanding, available at https://www.sifma.org/resources/research/us-abs-issuance-and-outstanding/.
45 Beryl Ajwang, Securitization of Solar Finance Continues to Grow, Clean Energy Finance Forum (15 May 2018), https://www.cleanenergyfinanceforum.com/2018/05/15/securitization-of-solar-
46 O'Sullivan and Warren, 'Solar Securitization: An Innovation in Renewable Energy Finance,' MIT Initiative Working Paper, http://energy.mit.edu/wp-content/uploads/2016/07/MITEI-WP-2016-05.pdf (July 2016).
48 Ajwang, Securitization of Solar Finance Continues to Grow.
50 O'Sullivan and Warren, 7.
51 See, e.g.: Carson, Neglia, Polvere, 'Mill City Solar Loan 2019-2 Ltd. and Mill City Solar Loan 2019-2 LLC,' Kroll Bond Rating Agency (30 July 2019), available at https://www.krollbondratings.com/show_report/20985 (last visited on 11 September 2019); Smart, Lin, Khan, DeJong, 'Sunrun Athena Issuer 2018-1, LLC,' Kroll Bond Rating Agency (20 December 2018), available at https://www.krollbondratings.com/show_report/14212 (last visited on 11 September 2019); Smart, Lin, Nocera, DeJong, Khan, 'GoodGreen 2017-2,' Kroll Bond Rating Agency (14 November 2017), available at https://www.krollbondratings.com/show_report/8020 (last visited on 11 September 2019).
52 Beryl Ajwang quoting Lowder and Mendelsohn, 'The Potential of Securitization in Solar PV Finance' (December 2013), National Renewable Energy Laboratory, https://www.nrel.gov/docs/fy14osti/60230.pdf; O'Sullivan and Warren.
53 Joshua Gatmaitan, Chaz Schmidt and Rohit Bharill. ABS Research: Looking Up and Ahead for Wireless Tower Securitizations. Morningstar Credit Ratings, April 2019. https://ratingagency.morningstar.com/PublicDocDisplay.aspx?i=unBA4wD1izA%3d&m=i0Pyc%2bx7qZZ4%2bsXnymazBA%3d%3d&s=
55 Matt Levine, Put Your Business in a Box, Bloomberg Opinion (29 August 2019) https://www.bloomberg.com/opinion/articles/2019-08-29/put-your-business-in-a-box (last visited on 19 September 2019).
56 Glen Fest, Weekly Wrap: Qualifying what 'QM' means, Asset Securitization Report (4 September 2020, 11:10 AM),https://asreport.americanbanker.com/list/weekly-wrap-qualifying-what-qm-means.
57 Michal Buszko, Catherin Deffains-Crapsky, Whole Business Securitization in Structuring and Refinancing of LBO, Research Papers of the Wroclaw University of Economics (1 November 2013).
58 Vinod Kothari, Whole Business Securitization: Secured Lending Repackaged?, Duke Journal of Comparative & International Law, Vol. 12:537, 537.
59 Kroll Bond Rating Agency, An Overview of the Whole Business Securitization Market, 26 August 2019. https://www.krollbondratings.com/show_report/22945 (last visited on 19 September 2019).
60 David Reinsel, John Gantz & John Rydning, The Digitization of the World – From Edge to Core 3, IDC White Paper, https://www.seagate.com/files/www-content/our-story/trends/files/dataage-idc-report-final.pdf (last updated May 2020).
61 Rich Miller, Investors See Data Centers as Critical Infrastructure for the New Economy, (Data Center Frontier (9 June 2020), https://datacenterfrontier.com/investors-see-data-centers-as-critical-
62 id.; Drew Campbell, A data center company pioneers asset-backed financing, Institutional Investing in Infrastructure (21 February 2019), https://irei.com/news/data-center-company-pioneers-asset-backed-financing/.
63 Hayk Saakian, Data Centers and their Importance to Modern Business, Data Center News (31 October 2019), https://www.colocationamerica.com/blog/data-centers-importance-
65 New Issue Report, ExteNet Issuer, LLC, Series 2019-1, (Jul.Kroll Bond Rating Agency (19 July 2019), https://www.krollbondratings.com/documents/report/20010/abs-extenet-issuer-llc-2019-1-new-issue-report.
67 Miller, supra note 61.
68 New Issue Report, supra note 65.
69 King & Spalding LLP, Best Practices for Security and Perfection of Digital Infrastructure Assets, https://www.kslaw.com/news-and-insights/best-practices-for-security-and-perfection-of-digital-infrastructure-assets, (last updated 9 August 2021).