The Role of the ABS Indenture Trustee in the Post-Meltdown Structured Finance Environment: Just What Are You Implying?

Abstract

This article explores issues relating to whether indenture trustees who administer asset-backed transactions ought to be held to responsibilities beyond those explicitly provided for in the governing securitization documents to which they are parties. The general rule of law is that the indenture trustee is only responsible and liable for the performance of such duties as are specifically set forth in the indenture. The author questions whether this principle is still relevant in the post-meltdown environment, whether ABS trustees should do more than what is required of them in the documents to help issuers and investors turn things around if ABS trustees are to remain relevant in the new structured finance dynamic, and whether there should be some implied duties, even in situations prior to events of default, where ABS trustees can perform the tasks that need execution. The author believes that for ABS trustees to remain relevant, they can and should be ready to do things they may not have been asked to do before, but whatever those things are, they must be unambiguously and explicitly incorporated into the governing documents.

TOPICS: CLOs, CDOs, and other structured credit, asset-backed securities (ABS)