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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Other tax rules on corporate finance: securitisation: periods beginning on or after 1 January 2007: the regulations: warehouse companies: abortive warehouse arrangements

Abortive warehouse arrangements

Due to unpredictable commercial factors, a warehouse company may hold assets which are not eventually securitised by being transferred to a note issuing company or asset holding company or by the warehouse company itself becoming a note issuing company or asset holding company. In such a case, the assets in question may be transferred back to the originator or transferred to some other company which is not a securitisation company. If this occurs, it will not necessarily cause the warehouse company to lose its status as such. The company will still be capable of being a warehouse company so long as there is clear evidence that its genuine and overriding purpose in acquiring and holding the assets in question was to hold them on an interim basis in order to facilitate an eventual securitisation of those assets. Such evidence will commonly be found in the bank loan documentation for a warehouse company, which may include the following:

  • incentives for the borrower to repay the loan prior to maturity and within a relatively short period (commonly between two and three years) of drawdown;
  • provisions referring specifically to a possible future securitisation, for example provision for fees to be paid to the lending bank if it acts as arranger of a future securitisation;
  • the imposition of eligibility criteria (in conformity with those imposed by the rating agencies) as regards the assets that will constitute acceptable security for the bank loan to the warehouse company.

These examples are illustrative only and the question of whether any given assets are held for the purposes of eventual securitisation and of how long any such purpose continues to exist, will always depend on all of the facts in any particular case.