Quick 101: Security Trustee Services - February 2023
With more organisations appointing independent security trustees for their debt listings, Albert Cilia, Managing Director of our Malta office, provides a quick overview of the role of the security trustee, why one is appointed and what the trustee will do in practice.
Financing remains a regular requirement for many organisations, whether to repair a balance sheet, bolster working capital or to fund acquisitions and other investments in growth. While bank lending remains an important financing tool, increasing numbers of businesses are considering debt listings for their financing requirements.
In turn, more organisations are being required to appoint a Security Trustee either directly by listing authorities or as a mean of demonstrating best practice to counterparties.
Security Trustee Responsibilities
The responsibilities of the Security Trustee are:
- To operate and co-ordinate matters between the bond issuer and bond holders thus facilitating the transaction in general;
- To operate in unbiased manner ensuring the necessary securities and distributions; and
- To provide the necessary technical and legal expertise in operating such an arrangement allowing each part to focus on their key operations.
What the Security Trustee Does in Practice
In practical terms the Security Trustee will:
- Hold the assets in trust for the benefit of the bond holders;
- Ensure bond proceeds are being directed as specified in the offering document and organise payments accordingly; and
- Carry out the necessary actions in the event of bond default.
Such arrangements would be formalised with a Security Deed agreement and when applicable pledges formalised by notarial deed.
The security trustee will also handle any other regulatory or tax filings which are inherent to the role to ensure the arrangement remains in good standing and continues to function smoothly.
How We Can Help
Our dedicated security trustee team in Malta supports numerous clients in relation to their debt listings, and offers the following services:
- Acting as an independent security trustee to securely hold the assets in trust;
- Enforcing security across multiple jurisdictions;
- Working with parties to mitigate issues and to reduce risk during the enforcement process; and
- Supporting the refinancing of a transaction in distressed situations.
To find out more, please contact Albert Cilia, Managing Director of our Malta office.