The Regulated Covered Bonds Regulations 2008

PART 6PRIORITY OF PAYMENT

Priority in a winding up

27.—(1) Subject to—

(a)section 115 of the 1986 Act (expenses of voluntary winding up) or, in Northern Ireland, article 100 of the 1989 Order (expenses of voluntary winding up); and

(b)the priority of the expenses of the winding up in a compulsory liquidation;

where an owner is wound up, the claims of relevant persons shall be paid from the relevant asset pool in priority to all other creditors.

(2) “Relevant persons” are—

(a)regulated covered bond holders;

(b)persons providing services for the benefit of those bond holders;

(c)the counter-parties to hedging instruments which are incidental to the maintenance and administration of the asset pool or to the terms of the regulated covered bond; and

(d)persons (other than the issuer) providing a loan to the owner to enable it to satisfy the claims of the persons mentioned in sub-paragraph (a), (b) or (c).

(3) The claims of the persons mentioned in paragraph (2)(b), (c) and (d) may rank equally with, but not in priority to, the claims of the persons mentioned in paragraph (2)(a).

Realisation of a charge

28.—(1) Subject to regulation 29, if—

(a)any asset comprised in the asset pool is charged as security for claims in priority to any charge over that asset granted to secure the claims of relevant persons; and

(b)the charge which has priority is realised at any time when the owner is not in the course of being wound up;

the proceeds of the realisation of that charge must, after payment of the expenses referred to in regulation 29 and any other expenses relating to that charge, be first applied to satisfy the claims of relevant persons at such time as those claims fall due for payment.

(2) Subject to regulation 29, if—

(a)any asset comprised in the asset pool is charged as security for several claims;

(b)any agreement between the creditors of that charge gives priority to the claims of any person above the claims of the relevant persons; and

(c)that charge is realised at any time when the owner is not in the course of being wound up;

the proceeds of the realisation of that charge must, after payment of the expenses referred to in regulation 29 and any other expenses relating to that charge, be first applied to satisfy the claims of the relevant persons at such time as those claims fall due for payment.

Expenses

29.—(1) Costs properly incurred by a liquidator, provisional liquidator, administrator, administrative receiver, receiver or manager of the owner in relation to—

(a)persons providing services for the benefit of regulated covered bond holders;

(b)the counter-parties to hedging instruments which are incidental to the maintenance and administration of the asset pool or to the terms of the regulated covered bond; or

(c)persons (other than the issuer) providing a loan to the owner to enable it to meet the claims of regulated covered bond holders or pay costs falling within sub-paragraph (a) or (b);

shall be expenses incurred in a winding up, administration, administrative receivership or receivership of the owner, as the case may be.

(2) Such expenses shall be payable out of—

(a)the proceeds of the realisation of the charge, in the case of a receivership; or

(b)the assets of the owner, in an administration, winding up or provisional liquidation,

and shall rank equally among themselves in priority to all other expenses.