If a partner (Loan Originator) becomes insolvent, Debitum manages the entire recovery process on behalf of investors.
Asset-Backed Securities (ABS)
For ABS, investors' claims are secured by a pledge over the underlying loan portfolio (the "assets").
Debitum acts as the collateral agent, holding this pledge for all investors in that specific pool. If the partner goes bankrupt, Debitum enforces this pledge.
This allows us to:
Take control of the underlying loan portfolio.
Manage the recovery process directly.
Distribute recovered funds to investors.
This pledge is designed to give investors priority over the partner's other general creditors with respect to those specific assets.
Debitum typically holds additional security (such as portfolio pledges or sureties) from the partner. We would initiate the process of recovering funds using these securities.
If the partner failed to honor the Buyback Obligation before bankruptcy, recovery relies primarily on the underlying assets and the additional securities held by Debitum. It is unlikely that a bankrupt partner would be able to fulfill the buyback.
The recovery process can be complex and depends heavily on the legal jurisdiction and the specific securities in place for that partner.