case study
Funders and Rating Agencies often require the appointment of a backup (or standby) servicer to ensure a transition between servicers with minimal disruption to cash flow. A transition may occur for any number of reasons inclining the failure of the prmary servicer .
Each transition may require a different approach. Therefore, the Standby Servicer must have access to various options and be able to implement them effectively to restore normal business operations as quickly as possible with minimal disruption.
In the Australasian market, the Primary Servicer typically originates financial assets and assigns their beneficial ownership to a special funding or securitisation entity. The funding structure is typically tiered, with the Primary Servicer (or its associated interests) providing the lower-ranking equity in the transaction. Consequently, the Primary Servicer has a vested interest in avoiding any actions that would trigger a transition. The Primary Servicer will usually commit in the transaction documents to assist the “Standby” with resources and staff if a transition becomes necessary.
Events rarely occur exactly as documented. Verofi experienced this firsthand when a utility company serving numerous consumers entered liquidation. The company's staff were terminated, its resources fell under liquidator control, and its service suppliers became unsecured creditors.
The main assets that had been financed through securitisation services previously supplied to the servicer, were required to maintain cashflow from the assets. Verofi was activated to manage all the assets. Verofi collaborated effectively with the trustee, funders, former senior management and employees, legal counsel, accountants, essential suppliers, and liquidators to successfully employ qualified staff, obtain required resources and restore normal business operations within a reasonable timeframe.
In the months following liquidation, Verofi acted to coordinate the team and utilise available resources to maintain business and casflow continuity. The alternative of having several thousand consumers as unsecured creditors in a liquidation was avoided. The securitisation structuring was well thought through and implemented.
