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Then banks and certain other financial institutions then began through the sass’s and sass’s to utilities he secondary market more extensively to maximize the available profits. The market was further developed by the development of serialization (see Chapter 7), the entry into the market of non banking institutions, funds investing in loan products and the expansion of the leveraged buyout market in the corporate sector.
Finally in various parts of the world organizations were set up to facilitate standard form documentation and operational procedures to make it easier to use the market. In the U. K. The Loan Markets Association (ALMA)2, in the United States the Loan Syndication and Trading Association (LAST)3 and in Asia the Asia Pacific Loan Markets Association (PALM)4 all helped facilitate market activity in this way. The increasing use of asset sales by banks in the U. K. Was further facilitated by a number of factors.
It concerned a partnership formed between two leading boxing promoters, Don King from the United States and Frank Warren from Britain. Both agreed to pool their promotion agreements into a partnership. Some of these agreements contained a clause prohibiting assignment by the promoter. It was held by the Court of Appeal that the fact that a trust was used as the vehicle for transferring the promotion contracts endured the contractual debarring of assignment irrelevant.
This is potentially interesting as the standard ALMA multicultural revolving credit agreement contains a clause stating that the lender(s) cannot assign or otherwise transfer the loan without the debtor’s consent. It has been argued by some commentators that this case sets a precedent to the effect that :a trust will provide a useful technique for alienating ‘unassailable’ chose in action. “. However, it seems likely that the arrangement has limited potential as some commentators have already suggested.
Attempts to utilities trust arrangements would face some degree of uncertainty due to the equitable obligations which would apply. There is no evidence that in the years since the Don King case the markets have tried to adopt this approach as a regular method of debt transfer though it has seen some use in the distressed debt market. It is not surprising that it is not more popular; a bank rendering itself a trustee to pass a share in a syndicated loan to another bank would be subject to the very strict rules applying to trustees and may become a fiduciary in relation to the debt concerned.
This is an unappealing arrangement from their point of view and thus the trust is not likely to be used as a method of debt transferee. In addition, where there is a prohibition against assignment, a trust could not be used as a vehicle to enable the beneficiary to sue the original debtor so as to enforce the borrower’s obligations under the original contractor. >Development of the market a party acquiring the debt is not a U. K. Bank or from a state covered by a suitable > method of debt transfer, perhaps in part because the last two of these disadvantages are no longer a common issue.