Module 4 · Chapter 9

Enforcement and the Waterfall

When a borrower fails, the lender's security has to be turned into money. This chapter shows who sells the assets, who the law pays first, and what a weak charge costs the lender.

≈ 11 min read 8-question test

In this chapter

  • Two ways to enforce: an administrator or a receiver
  • The order in which the law pays out the money
  • What a freely used bank account cost the Bank

9.1Enforcement in one paragraph

Security is worth what the assets bring in when they are sold. After an Enforcement Event, the Bank chooses who will sell them. The law then decides who is paid from the money, and in what order. Some claims come before the Bank, whatever the Debenture says.

When the Company broke its loan terms, your firm wrote a security review for the Bank. Priya, your supervisor, asked you for one page of it: if the Bank appointed administrators at the end of March 2028, what would it get back? Nobody was appointed and the Company recovered, but the page shows how enforcement works.

Key point

In a failure, a pound under a fixed charge is worth more to the Bank than a pound under a floating charge. That is why lenders fight so hard for fixed charges.

Also in this chapter

  1. Two routes: an administrator or a receiver
  2. Who is paid first: the waterfall
  3. The security review in two columns
  4. Who lost the £400,000, and who gained it
  5. Can the security itself be undone?
  6. Your job

Preview

The rest of this chapter opens with a free account. Every edition is free to read until 31 January. Open a free account by the end of that day and keep every edition published by then, for good. Open it from the edition home →