High Court Grants Bank Access To Customer Documentation Relating To Receivables In Securitisation Transaction

• Published date: 02 September 2022
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Securitization & Structured Finance, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Ms Joy Amis, Ceri Morgan and Nic Patmore

The High Court has granted an application made by a bank acting for Senior Noteholders in a securitisation structure, for production of underlying customer documents relating to the securitised receivables. The application was made against the Note Issuer and Collection Agent in respect of the receivables, to enable the bank to value the Notes in accordance with its regulatory obligations to its clients: Banca Generali SPA v CFE (Suisse) SA & Anor [2022] EWHC 1450 (Ch).

This is a useful judgment for financial institutions fulfilling a similar role in securitisation structures, where there are concerns about the information provided in relation to the underlying assets which have been securitised. The decision highlights the importance of having a broad and clear contractual right for the bank to obtain any relevant underlying documents to enable its own assessment of valuation. The regulatory disclosure regimes applicable to securitisation transactions under the EU and UK Securitisation Regulations provide for investors to have access to the contractual documentation relating to the securitisation itself, but do not explicitly provide for the customer documentation or contracts relating to the underlying receivables to be made available.

The decision is considered in more detail below.

Background

The parties were involved in three securitisation structures (the Structures) pursuant to which trade finance receivables relating to export transactions from Europe to emerging markets were securitised.

The defendant Issuer (the Issuer) had acquired the receivables and issued different tranches of notes for each of the Structures (the Notes). The Bank acted as the Senior Notes Initial Subscriber and/or Placing Agent. The Notes relating to the Structures were not publicly traded, and the vast majority were acquired by clients of the Bank, who were the Senior Noteholders. The Bank also had a significant ongoing role as a party to the transaction documents in relation to the securitisation and was able to exercise rights on behalf of the Senior Noteholders. The second defendant acted as Collection Agent and was the holder of the Junior Notes (accounting for 5% of all the Notes in issue).

In 2021, the Bank became concerned that inaccurate information had been provided in respect of the underlying exposures in the securitisation Structures, in particular that some of the receivables were common to more than one portfolio. There were material changes in the description of the nature of the...