Agent status in structured asset finance

The recent case of Torre Asset Funding v RBS reiterates that the contract is king, especially in the context of complex structured asset finance facilities.

As part of a six-tiered finance facility put together by the defendant (RBS), the claimant (Torre) loaned money to Dunedin Property Industrial Fund (Holdings) Ltd to acquire a portfolio of industrial units in late 2005/mid-2006. Dunedin gave market standard contractual covenants to the lenders, including an interest cover covenant regarding the relationship between the income for Dunedin from the portfolio and the interest payments due to be made by Dunedin to the various levels of lender; and a loan to value covenant regarding the relationship between the value of the properties in the portfolio charged as security for the loans and the loan amounts outstanding. Breach of either of those covenants would allow Torre (subject to the priority of other, more senior lenders within the structure) to call in the loans.

In addition to being one of the lenders, RBS acted as agent for Torre, responsible for the flow of certain financial information from Dunedin…

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