The High Court has granted an application made by a bank acting
for Senior Noteholders in a securitisation structure, for
production of underlying customer documents relating to the
securitised receivables. The application was made against the Note
Issuer and Collection Agent in respect of the receivables, to
enable the bank to value the Notes in accordance with its
regulatory obligations to its clients: Banca Generali SPA v CFE (Suisse) SA &
Anor  EWHC 1450 (Ch).
This is a useful judgment for financial institutions fulfilling
a similar role in securitisation structures, where there are
concerns about the information provided in relation to the
underlying assets which have been securitised. The decision
highlights the importance of having a broad and clear contractual
right for the bank to obtain any relevant underlying documents to
enable its own assessment of valuation. The regulatory disclosure
regimes applicable to securitisation transactions under the EU and
UK Securitisation Regulations provide for investors to have access
to the contractual documentation relating to the securitisation
itself, but do not explicitly provide for the customer
documentation or contracts relating to the underlying receivables
to be made available.
The decision is considered in more detail below.
The parties were involved in three securitisation structures
(the Structures) pursuant to which trade finance
receivables relating to export transactions from Europe to emerging
markets were securitised.
The defendant Issuer (the Issuer) had acquired
the receivables and issued different tranches of notes for each of
the Structures (the Notes). The Bank acted as the
Senior Notes Initial Subscriber and/or Placing Agent. The Notes
relating to the Structures were not publicly traded, and the vast
majority were acquired by clients of the Bank, who were the Senior
Noteholders. The Bank also had a significant ongoing role as a
party to the transaction documents in relation to the
securitisation and was able to exercise rights on behalf of the
Senior Noteholders. The second defendant acted as Collection Agent
and was the holder of the Junior Notes (accounting for 5% of all
the Notes in issue).
In 2021, the Bank became concerned that inaccurate information
had been provided in respect of the underlying exposures in the
securitisation Structures, in particular that some of the
receivables were common to more than one portfolio. There were
material changes in the description of the nature of the
instruments/security provided. There were also actual/expected
failures to redeem Senior Notes in full and what appeared to be an
increasing pattern of receivables in arrears.
The changes, together with what the Bank considered to be
material discrepancies with previous reports, led to complaints
from the Bank that it was unable to calculate a fair value for the
Senior Notes in accordance with its regulatory obligations, and
ultimately to the issue of these proceedings. The Bank brought an
application for an order that the Issuer and Collection Agent
provide copies of the “transactional documents”
constituting the receivables such as loan agreements, guarantees
and security documents, for each of the three Structures.
The Bank asserted that it had a contractual right to request the
documents under Clause 12 of the relevant Fiscal and Calculation
Agreement or Intercreditor Agreement (depending on the Structure,
referred to collectively as the Agreements), in
order to satisfy itself that the information provided by the
defendants was accurate. Clause 12 of the Agreements provided as
follows (emphasis added):
“Each Party shall, within ten
Business Days of a written request by another Party, supply to that
other Party such forms, documentation and other information
relating to it, its operations, or the Notes as that other Party
reasonably requests for the purposes of
that other Party’s compliance with Applicable
The Bank said it was entitled to the transactional documents
relating to receivables to comply with its regulatory obligations
under Articles 60 and 63 of the Commission Delegated Regulation
(EU) 2017/565 (Regulation 565) as understood in
light of Article 24(1) of MIFID II, which were subject to expert
evidence in relation to the same, to report on the value of the
Senior Notes to its clients.
Each of the Structures was subject to EU Regulation 2017/2402
(the Securitisation Regulation) and Commission
Delegated Regulation (EU) 2020/1224 (the Disclosure
Regulation), which required the Issuer and Collection
Agent to provide certain information in relation to the underlying
documents relating to the securitisation to any holder with
exposure to the securitisation. However, neither requires provision
of any underlying documents relating to the underlying receivables
which were part of the securitisation. This dispute therefore
focused on the right contained in Clause 12 of the Agreements.
The court granted the Bank an order requiring the Issuer and
Collection Agent to provide the relevant documents, subject to a
proviso that the Bank could use the documents only for the purpose
of complying with its regulatory requirements.
The court applied the relevant principles in respect of a
mandatory injunction as per American Cyanamid v Ethicon Ltd  AC
396 and Zockoll Group Ltd v Mercury Communications Ltd
(No.1)  FSR 354 at 366. While in form the application
was for an interim injunction, in practice it comprised
substantially all the relief that the Bank sought, and so required
the court to have a high degree of assurance that the Bank would
prevail on the issues at trial.
The court considered two key issues in granting the relief
sought by the Bank.
1. Did the documents and information fall within the scope
of Clause 12?
Firstly, the court considered whether the documents sought fell
within the scope of Clause 12 of the Agreements.
The Issuer and Collection Agent contended that documents
relating to the receivables were not documents or information
“relating to.the Notes”, and there was a distinction
between documents relating to the Notes and those in relation to
the underlying exposures, with the latter not falling within the
scope of Clause 12. In addition, the Issuer and the Collection
Agent suggested that Clause 12 ought to be interpreted in light of
the relevant regulatory provisions, which did not provide for such
documents or information to be provided, and that Clause 12 needed
to be interpreted in the manner contended by the Issuer and
Calculation Agent, otherwise it would be a broad investigatory
right of imprecise scope.
The court rejected the Issuer and Collection Agent’s
submissions finding that the documents fell within the scope of
Clause 12. As a matter of construction, the Agreements clearly
demonstrated that the concept of “relating to the Notes”
was intended to capture information relating to the underlying
exposures and the Notes themselves, which also made business sense.
The court commented that it would have been very strange if the
parties had agreed something to the contrary, otherwise the Bank
would not have been able to obtain the information necessary to
complete its valuation of the Senior Notes. The fact that the
regulatory provisions did not require such documents or information
to be provided was not to the point; it was open to the parties to
agree as a matter of contract that such documents or information
ought to be provided. Clause 12 was limited by purpose and the
requirement of reasonableness: (a) in that the requesting party
must act reasonably; and (b) only documents or information that are
reasonably available or can be obtained using reasonable efforts,
needed to be provided, so it was not an open-ended right of
The court also found that the Bank was required to carry out a
valuation exercise to comply with Articles 60 and 63 of Regulation
565, and that Clause 12 did not establish an objective
“necessity” test (i.e. meaning only documents which were
necessary to enable the Bank to carry out the valuation could be
requested), but instead provided that the requesting party’s
actual purpose in seeking the documents needed to be established.
Further, Clause 12 was not to be interpreted narrowly so as to mean
that the Bank could obtain documents to verify information which
had already been provided by the Issuer and the Collection
2. Was the request reasonable?
Secondly, the court considered whether the request for documents
made by the Bank was reasonable.
The Bank contended that it was reasonable. The documents must
have been collated by the Issuer and the Collection Agent to
provide the information which had been provided already, and was
needed to carry out the valuation exercise which was required in
relation to one of the Structures. The need to review
confidentiality provisions would fall on external lawyers rather
than the Issuer and Collection Agent’s employees, and ought not
to be afforded much weight in circumstances where material
information in relation to the receivables had already been
reported in the context of the securitisation structure.
However, the Issuer and Collection Agent suggested that the
request was far from reasonable. Information had been provided to
the Bank, which had been thoroughly checked, and there was no
reason to doubt the accuracy of that information. The documents
would be difficult to gather and disclose, requiring a small cohort
of employees to be diverted from their day job for a period of
approximately two to three months. A significant number of the
documents were likely to contain confidentiality provisions and
likely to be governed by foreign law, requiring foreign counsel to
be engaged which would be time consuming and expensive.
The court outlined that, in the particular circumstances, the
Bank’s request was reasonable for two key reasons:
- The Bank’s request was for transactional documents
constituting the receivables (i.e. loan agreements and related
security documents). This was a proportionate request, in light of
the specific concerns raised as to the quality of the information
provided to it already, to enable the Bank to assess the nature of
the instruments and security available, which were fundamental to
valuation. For instance, receivables that are in arrears or risk
being non-performing, would affect valuation.
- Other provisions in the transactional documents required the
Collection Agent to gather/keep documents, and in one case to make
documents available to the Issuer within two business days, meant
that the court was concerned by submissions that the documents
could not be gathered and disclosed easily; in fact, these
provisions suggested they either had not been or could not be
complied with, or that the information provided to the Bank had not
been cross-checked (or else, the documents would have been
available to the Issuer and the Calculation Agent).
As a result, the court found in favour of the Bank on the
substantive issues in the application. The court accepted that
damages would not be an adequate remedy for the Bank, because it
could face concern from regulators and clients about a persistent
failure to report on value; however, damages were adequate for the
Issuer and the Collection Agent, because the cost of collation was
quantifiable (and the Bank was offering the usual cross-undertaking
on damages). There was nothing else in the balance of convenience
which altered the court’s position. Following the judgment, the
parties engaged with one another in relation to the timetable for
provision of the documents, and the use of a confidentiality
agreement which would apply to the documents.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.