True Sale and Non-Consolidation Legal Opinions in Securitization and Structured Financing Transactions

Description

Lenders, rating agencies, trustees, issuers, and servicers generally require specialized opinions of counsel in structured finance transactions. In the case of true sale and non-consolidation opinions, their general purpose is to ensure the "bankruptcy remoteness" of certain parties and assets to the transaction.

A true sale opinion is an opinion letter in which counsel opines that transferred financial assets have been sold and that they will not be property of the estate of the seller in a subsequent insolvency proceeding.

A non-consolidation opinion is an opinion letter issued by counsel to the borrower pursuant to which counsel opines that the assets of the borrower--and the collateral offered to secure the deal--will not be subject to substantive consolidation with certain affiliated parties in the event of a bankruptcy filing.

The process of rendering a true sale or non-consolidation opinion involves review of the relevant questions and considerations underlying the proposed transaction documents. To protect the attorney providing the opinion from potential liability, the opinion letter must describe the scope and limitations on which the opinion is being rendered, any factual or legal assumptions underlying the opinion, and any qualifications under which the opinion is based.

Listen as our authoritative panel of practitioners discusses drafting true sale and non-consolidation opinion letters and best practices for the opinion giver to minimize risks.