Article
Article
By Mark N. Lessard,
12.02.16
The purpose of this White Paper is to provide general guidance to transaction participants and practitioners in their consideration of the application of the provisions of Section 15G of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as added by section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and the federal interagency credit risk retention rules promulgated thereunder, codified at 17 C.F.R. Part 246 (the “CRR Rules”), to a typical issuance of securities by a newly formed special purpose vehicle that owns or will own, among other things, a portfolio of aircraft and related leases (a “Structured Aircraft Portfolio Transaction”). This White Paper was prepared by the law firms named above, but does not reflect the view of any law firm in the context of any particular transaction. The guidance set forth in this White Paper is for informational purposes only, and is subject to change in light of future federal interagency decisions interpreting the CRR Rules or applicable legislative or judicial action. Neither this publication nor the law firms that authored it are rendering legal or other professional advice or opinions on specific facts or matters, nor does the distribution of this publication to any person constitute the establishment of an attorney-client relationship.
Introduction
On December 24, 2016 the CRR Rules will come into effect for all classes of asset backed securities, except for asset-backed securities collateralized by residential mortgages (for which the CRR Rules came into effect in December of 2015). The CRR Rules require that each securitizer of “asset-backed securities” must retain an economic interest in a portion of the credit risk for all assets that the securitizer transfers, sells or conveys to a third party through the issuance of asset-backed securities. The CRR Rules apply only to issuances of “asset-backed securities”, as defined in Section 3(a)(79) of the Exchange Act (referred to herein as “Exchange Act ABS”). Thus, the gating question is whether a typical Structured Aircraft Portfolio Transaction constitutes an issuance of “a fixed-income or other security collateralized 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,…” (emphasis added)
For the reasons discussed below, we believe that the securities issued in a typical Structured Aircraft Portfolio Transaction do not constitute Exchange Act ABS and accordingly, the CRR Rules would not be applicable.
Download: Applicability of U.S. Risk Retention Rules to Structured Aircraft Portfolio Transactions