The COVID-19 pandemic has significantly affected market participants in different ways. This alert focuses on the specific impact of the COVID-19 pandemic on sellers of receivables - whether as securitisation originators or as sellers directly to banks or factors (collectively referred to as "originators" in this article).
At this stage, in relation to existing transactions, originators should consider:
- identifying their rights and obligations under the transaction documents (including any covenants to maintain rating levels or to meet any tests applicable to them or the assets);
- detecting any actual or potential breaches of covenants and undertakings;
- determining whether short term measures (e.g., payment holidays, waiver of late payment fees, discounts) are permitted under the transaction documentation;
- seeking appropriate solutions to address any actual or potential issues identified, including but not limited to seeking waivers or consents to amendments to the transaction documentation; and
- adjusting their internal processes and systems to reflect any changes to their obligations, to market conditions and to enable them to operate as efficiently as possible in the current environment.
These challenges present a renewed opportunity for originators to revisit their existing arrangements, identify issues and plan for the future.