Copyright (c) 1999 Chicago-Kent College of Law
Chicago-Kent Law Review
SYMPOSIUM: THE IMPACT ON SECURITIZATION OF REVISED UCC ARTICLE 9
74 Chi.-Kent L. Rev. 947
Steven L. Schwarcz *
The recent revisions of Article 9 of the Uniform Commercial Code ("UCC") are expected to have a significant impact on securitization - a type of financing that is perhaps the most rapidly growing segment of the U.S. credit markets and increasingly a major part of foreign credit markets. In its current form, Article 9 governs the sale of only certain types of assets that are involved in securitization transactions. Revised Article 9 attempts to broaden its coverage to virtually all securitized assets. I analyze how it does that and what it means for Article 9 to apply to these transactions, addressing issues of perfection and priority of asset transfers, commingling of proceeds, assignability of assets in the face of contractual restrictions, and the effect of negative pledge covenants. Finally, I show that the revisions of Article 9 do much to bring the commercial law setting for securitization into the twenty-first century.
Asset securitization is "by far the most rapidly growing segment of the U.S. credit markets" 1 and increasingly is becoming a major part of foreign credit markets. 2 In a typical securitization, a company (usually referred to as the "originator" 3 ) sells rights in income- producing or financial assets 4 - such as accounts, instruments, lease rentals, franchise and license fees, and other intangible rights to payment - to a special purpose vehicle ("SPV"). The SPV, in turn, issues securities to capital market investors and uses the proceeds of the issuance to pay ...
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