Find Lawyers in Frankfurt/Main, Germany for Structured Finance Law
Structured Finance Law Definition
Structured finance covers all kinds of financial instruments that are individually tailored to the financial needs of a customer. Such instruments combine and/or replicate traditional forms of borrowing (e.g. loans, stock, bonds) with other products such as derivatives, securitization, synthetic structures, etc. The aim of structured finance is to reduce capital costs and optimize both tax and liquidity costs.
Structured finance includes various transactions, e.g. sale-and-lease back, cross-border leasing, project finance, export and trade finance, leverage finance incl. management-buy-outs, loan and asset securitization like asset-backed securities and collateralized debt obligations (CDO’s).
Common characteristic of all structured finance transactions is that multiple parties are involved, often stemming from different jurisdictions – e.g. borrowers, shareholders, investors, and third-party security providers on the one side, and banks and other lenders, facility agents, security agents, and hedging providers on the other. The multitude of parties requires a complex contractual documentation which is often governed by various jurisdictions.
Typically, the borrower in a structured finance transaction is a special purpose vehicle, in order to set up a ring-fenced, insolvency remote financing where no other creditors may have access to the borrower, its assets, and the securities granted to the lenders. Further, the financing usually refers to operative cash-flow and its associated risks. For risk monitoring purposes, the parties would typically agree to financial covenants (e.g. loan-to-value ratio, interest- or debt-service-coverage ratio, debt yield) which reflect the risk situation at the time the loan is granted.
Structured Finance Law therefore covers structuring, drafting and negotiating all types of structured finance instruments.
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