Security on the real estate assets of the project company To describe the typical security package in a project financing, we have adopted a simple structure in which the sponsor directly holds the shares of the project company, which has no subsidiaries. Security interest is generally considered a protection for lenders to be repaid. In other words, if the borrower is unable to repay the debt or is in arrears, lenders can sell the assets subject to the security and use the proceeds to repay the financing through the enforcement of collateral rights. Either as a result of these obligations in security documents or by law, guarantees grant secured creditors certain rights of control, in particular to ensure that the validity and enforceable interest of the security interest are not affected, in order to preserve the value of the asset taken as collateral and, ultimately, to have control of the assets (without taking possession). The manner in which title is transferred depends on the nature of the security and may range from an effective physical transfer of the holding of the security rights to secured creditors to an instrumental or fictitious mode of transfer of ownership, such as registration of the interest in the security right in a registry, communication on the provision of security through a project contract to the counterparty under this contract, Vary. or simply the execution of a notarial deed forming security. The applicable law may impose different formalities for the creation and further development of guarantees or for their subsequent application, which may also lead to an increase in costs and taxes. Therefore, in the end, it is quite common for the law of jurisdiction in which the project is located regulates the creation and further processing of guarantee rights, even if the loan documents are subject to another law. It is therefore essential for lenders to ensure that they clearly understand the applicable local law with regard to security interests and, in particular, the differences between the types of security interests available (e.g.B. If no collateral is available on future assets, lenders may require that credit guarantees be provided for future assets, which constitutes an obligation to provide collateral on new assets or rights such as rights conferred by new project contracts. From an enforcement perspective, direct agreements grant lenders rights in the event of a breach of the project document, in order to prevent the counterparty from termitating it if the borrower is unable to remedy that breach, while an assignment of collateral gives lenders rights in the event of a delay under the facility agreement.
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