Securitization of Aberrant Contract Receivables

Originators of traditional receivables, such as automobile loans, use securitization and structured finance debt transactions to obtain financing at lower net costs than traditional secured financing. The typical securitization or structured finance debt transaction combines (i) a sale of receivables to a separate, bankruptcy remote, special purpose legal entity (an “SPE”) and (ii) a loan to the SPE secured by the receivables. This combination produces lower net financing costs because the SPE’s lender can obtain repayment of its loan from the receivables while avoiding the costs that the Bankruptcy Code imposes on direct secured lenders to originators that could become debtors in bankruptcy for reasons unrelated to the receivables. The viability of this financing technique, however, depends upon receivables that produce reliable cash flows with minimal reliance on an operating company. This article analyzes the reasons for the net costs savings of securitization and structured finance debt transactions and the structural features necessary to achieve those savings. This analysis provides a framework for assessing the feasibility of a securitization or structured finance debt transaction for any type of aberrant contract receivable

Securitization of Aberrant Contract Receivables

Originators of traditional receivables, such as automobile loans, use securitization and structured finance debt transactions to obtain financing at lower net costs than traditional secured financing. The typical securitization or structured finance debt transaction combines (i) a sale of receivables to a separate, bankruptcy remote, special purpose legal entity (an “SPE”) and (ii) a loan to the SPE secured by the receivables. This combination produces lower net financing costs because the SPE’s lender can obtain repayment of its loan from the receivables while avoiding the costs that the Bankruptcy Code imposes on direct secured lenders to originators that could become debtors in bankruptcy for reasons unrelated to the receivables. The viability of this financing technique, however, depends upon receivables that produce reliable cash flows with minimal reliance on an operating company. This article analyzes the reasons for the net costs savings of securitization and structured finance debt transactions and the structural features necessary to achieve those savings. This analysis provides a framework for assessing the feasibility of a securitization or structured finance debt transaction for any type of aberrant contract receivable

The Essential Elements of Judicial Independence and the Experience of Pre-Soviet Russia

Judicial independence, which first developed in the Anglo-American legal system, is valued by many countries as an important condition for the rule of law. Its existence in any legal system, however, depends on concrete institutional arrangements. In this Article, Professor Plank identifies four institutional elements necessary to establish and maintain an independent judiciary: fixed tenure (with limited exceptions), fixed and adequate compensation, minimum qualifications, and limited civil immunity. The presence of these elements ensures an independent judiciary in many countries. The lack of permanent tenure for judges in most American states, however, raises serious questions about their independence. To test the extent to which these elements may be universally applicable, Professor Plank analyzes the viability of judicial independence in nineteenth-century Russia. In 1864, Russia first created an independent judiciary when it radically transformed its legal system by incorporating and adapting a Western-style civil law system that purposely established an independent judiciary. The Judicial Reform contained all the institutional elements necessary to ensure the independence of Russian judges, and their independence endured during the remaining half-century of the Russian Empire despite attacks from the government and significant members of society. The successful implementation and operation of an independent judiciary even in the autocratic state of Russia demonstrates that any society desiring to implement a government based on the rule of law may establish and maintain an independent judiciary by incorporating these four institutional elements