Structured Finance Forensics
Investor feedback on transactions has consistently pointed to inaccurate reports that were not delivered on a timely basis. The following questions should therefore be asked:
Did the deal’s collateral conform to the criteria set out in the marketing material and legal covenants?
If reports were regularly late, indicating that the administrator was not reconciling the portfolio on a daily basis, can investors be sure that collateral substitutions have been fully tested?
Even if changes to the collateral were tested before substitution, were the tests performed accurately and precisely in accordance with the (often extremely complex) deal documentation?
Portfolio positions can be reversed through the life of the deal, retrospective covenant tests can be run and test results or hypothetical trade requests that were inaccurately reported can be highlighted, which could act as springboard to litigation or financial compensation.
Mistakes are frequently made at the reporting level. Any inflated results in compliance or portfolio profile tests may mean that positions were overvalued. Any trade substitutions that were passed by the administrator when in fact they either caused to fail or worsened an already failing covenant can, and have previously, opened the door to litigation or compensation.
Law Debenture has the expertise and technology to remodel and rerun collateral positions from the issue date. The Asset Backed Solutions team are market professionals with many years experience in modelling and administering a range of significant transactions. They are acutely aware of the typical errors that can occur at a testing and reporting level throughout the life of a deal.
Law Debenture possesses flexible technology solutions that can be configured to model and administer vehicles with varying structures, funding sources and collateral types including leveraged loans, ABS, CMBS, RMBS, CDS and TRS.