| A relatively new method of corporate finance known as asset securitization has emerged as one of the major forces in the United States' financial markets. At its most simplistic level, asset securitization is the issuance of a debt instrument backed by a revenue-producing asset of the issuing company. As asset securitization represents such a significant form of financing, its effects on, and importance to, the economy as a whole should not be underestimated.The Article, based on the analysis of corporate Special Purpose Vehicle ("SPV"), mainly discusses the bankruptcy remote system of asset securitization in the United States, and analyzes the judicial characterization of asset securitization transaction, thereby putting forwards the author's opinions. Finally, the author makes an analysis of the legal background which the application of asset securitization, especially the establishment of SPV and the bankruptcy remote system are faced with in China, pointing out the necessity and desirability of making a special legislation for ushering in asset securitization in China. This article proceeds of the following parts:In the preface herein, after outlining the relationship between corporate financing and asset securitization, the author points out that asset securitization is nothing but one of the forms of financial innovative techniques; at same time, the bankruptcy remote system of asset securitization of the United States is used to balance the disadvantageous situations on the protection of secured creditors cased by the automatic stay system under the bankruptcy code of the United States, to reduce the negative influence on the investment security brought out by borrowers' bankruptcy, to advance the credit rating of securities to be issued, thereby lowering the financing cost. In addition, the proceeding logic and the focus of the article are briefed as well in this part.After explaining in the first chapter the basics of asset securitization including the definition of asset securitization and of assets to be securitized, the process of asset securitization, the advantages therefrom in comparison with traditional corporate financing, the author begins to discuss the bankruptcy remote system, which plays a pivotal role in asset securitization. The bankruptcy remote system consists of two parts: one is to establish the bankruptcy-proofing SPV; the other is to structure the true sale in the transfer of assets to be securitized.The second chapter tries to make a discussion on how to structure a bankruptcy-proofing SPV. Generally, it can be done by means of three methods: (1) the first one is to make them remote from the possibility of a voluntary bankruptcy filing. This can be realized through the provisions of the bankruptcy waiver clauses in the constitutional documents of SPV. Of course, there exist the conflicting views in the judicial practices in some of the courts of the United States with respect to the legal effect of the bankruptcy waiver provisions. On the other hand, one of the keys to the bankruptcy remote structure of SPV is to place independent director(s) on the board of directors of SPV and the essential issue under the circumstances is to identify to whom the independent director(s) shall be held to owe fiduciary duty; (2) the second one is to protect SPV from involuntary bankruptcy filing through limiting or reducing the credit risk of SPV. Under some circumstances, a special arrangement between SPV and its creditors may be made to require the creditors to waiver their rights to file bankruptcy proceedings against SPV; (3) the third one is to protect SPV from substantive consolidation with the originator. In the event that a court discovers that SPV and the originator are not independent entities or SPV is in effect an alter ego of the originator, it may order a substantive consolidation between SPV and the originator based on its equity power, thereby detrimenting the interests of SPV's creditors.The third chapter discusses the issue of true s... |
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