Change font size: Switch to default font size Switch to medium font size Switch to large font size

  1st Annual Private Label RMBS Reform Symposium
New York, NY
November 12, 2014
  12th Annual African Capital Markets Conference
Cape Town, South Africa
November 13-14, 2014
  ABS Vegas 2015
Las Vegas, NV
February 8-11, 2015
  8th Annual Global Covered Bonds Conference
London, UK
March 5-6, 2015
  2nd Annual Investors’ Conference on European CLOs and Leveraged Loans
London, UK
March 9, 2015
  14th Annual Investors' Conference on Equipment Finance
New York, NY
March 12, 2015
  4th Annual Investors’ Conference on CLOs and Leveraged Loans
New York, NY
April 21-22, 2015
  3rd Annual Sunshine Backed Bonds Conference
New York, NY
April 30-May 1, 2015
  1st Annual Conference on European Alternative Financing & Marketplace Lending
London, UK
May 28, 2015
  Global ABS 2015
Barcelona, Spain
June 16-18, 2015
Main Website >>Structured Finance >>Blog >> Tag: Equipment
<< Back to Blog
Email/Share:

Stephen Whelan, Partner, SNR DENTON US LLP

Ambushed on the Oregon Trail
Monday, February 28 2011 | 11:28 AM
Stephen Whelan
Partner, SNR DENTON US LLP

Senate Bill 892 was recently introduced in the Oregon legislature. It would affect any equipment sales or lease contract that contains a so-called “hell or high water”, or waiver of defenses clause and, by permitting the lessee or buyer to deposit payments into an attorney trust account or a statutory escrow trust account, would prohibit the lessor/seller or any assignee from enforcing the HHW clause or reporting the nonpayment “as a default or as information that may negatively affect the person’s credit rating…or ability to obtain credit.”

Commentators have identified at least one dozen defects or other problems with this Bill. One of them is that the Bill permits withholding of payments by reason of any “dispute” between the seller/lessor and the counterparty--not just a dispute over operation of the equipment or even a dispute relating to that particular contract. Another is that the Bill applies to any “payments”, so amount payable for maintenance, taxes, indemnities also could be placed in escrow, thereby forcing the lessor to pay property taxes or repair bills or else risk losing title to the equipment.

The Bill applies to assignees of the seller or lessor, so lenders, whole loan purchasers and securitizers would be prohibited from using the HHW clause to enforce payment. There is no provision for the lessor, securitizer or other assignee to receive interest, at the contract overdue rate, on the escrowed amounts.

In short, the proposal would undercut one of the linchpins of lease and securitized finance: the absolute and unconditional obligation of a lessee or purchaser to make payments. If enacted, it could force lenders, syndicators and securitizers to forbid any Oregon contract from being included in contract pools which they finance. Of course, the Bill is silent regarding which contracts would be affected, so the chilling effect on Oregon-related equipment would be even greater.
0 Comment | Add Comment(s) | Regulation, Securitization, Senate_Bill_892, Lease_Finance, Equipment,


<< Back to Blog
Email/Share: