This kind of trust allows a beneficiary (creditor) to obtain the transfer of assets to a trust, as collateral for the payment of a claim. The ownership transfer ensures an exclusive right on the assets transferred to the trust estate to the beneficiary (creditor) in case of default of the debtor (settlor). The trustee preserves and manages the assets until the claim is fully paid, if it’s not the case, the trustee will activate the trust in favor of the beneficiary in accordance with the provisions of the agreement. This collateral purpose can be attached to a management purpose.
Applications of the Collateral trust:
- Collateral trust and in bonis : collateral of financing (bank or bond financing; syndicated loan/structured financing with subordination agreement etc.). In the context of a stock trust or LBO trust, involving the transfer of the shares of the acquired entity, Equitis both manages the assets and acts as a security agent for the beneficiaries.
- Collateral trust in insolvency and preventive proceedings: under the authority of the commercial court and the debtor’s “mandataire” or “administrateur judiciaire” Equitis’ role is to secure financing or standstill agreements signed within the framework of the proceedings conducted by the court.
An Equitis operation: Pétroplus.