Finance
Security Packages That Hold at Enforcement
Security is drafted in optimism and tested in distress. The gap between the two is where recoveries are lost.
A security package should be drafted by asking a single question of every provision: how does this operate on the worst day of the credit? Registration timing, perfection formalities, and priority arrangements are all answered by that test.
Common weaknesses include security over assets that cannot practically be realised, guarantees from entities without independent substance, and intercreditor terms that suspend enforcement without a defined endpoint.
Documentation should also anticipate the administrative reality of enforcement: who holds the originals, who can execute, and what consents are required at the moment they are least easily obtained.
A short enforcement walkthrough at the drafting stage typically surfaces more value than an additional round of negotiation on margin.
This article is general commentary and does not constitute legal advice. No attorney-client relationship arises from reading it. Advice on a specific matter should be sought before acting.