Class 7 Secured Transactions Spring 2021 Perfection Secured

Class 7 Secured Transactions Spring 2021 Perfection: Secured Party’s Name Randal C. Picker James Parker Hall Distinguished Service Professor of Law The Law School The University of Chicago Copyright © 2001 -21 Randal C. Picker. All Rights Reserved.

9 -502 n (a) [Sufficiency of financing statement. ] u. Subject to subsection (b), a financing statement is sufficient only if it: w (1) provides the name of the debtor; w (2) provides the name of the secured party or a representative of the secured party; and w (3) indicates the collateral covered by the financing statement. January 17, 2022 2

9 -503: Name of Secured Party n (d) [Representative capacity. ] u. Failure to indicate the representative capacity of a secured party or representative of a secured party does not affect the sufficiency of a financing statement. January 17, 2022 3

9 -503: Name of Secured Party n (e) [Multiple debtors and secured parties. ] u. A financing statement may provide the name of more than one debtor and the name of more than one secured party. January 17, 2022 4

Copper King Noonan 1984 PN Patterson $62. 5 K PN Copper King 2/1/86 $100 K 1/15/87: Copper King Files Ch 11 Which SPs are perfected? Trust SA: Furn & EQ FS: SPs: Noonan, Patterson $225 K in Debt January 17, 2022 5

Organizing Bank Lending Groups Debtor Bank 1 1/1: SA/FS: All Assets $ Some time later, the Debtor would like to borrow more money. What are the options? January 17, 2022 6

TTYN (1 of 2) Lending Groups: Version 1 1/1: SA/FS: All Assets, $10 K Bank 1 Debtor 1/15: SA, FS: All Assets, $10 K Finco January 17, 2022 2/16: SA/FS: All Assets, $10 K What are the priorities? Bank 2 7

TTYN (2 of 2) Lending Groups: Version 2 1/1: SA/FS: All Assets, $10 K Bank 1 Debtor 1/15: SA, FS: All Assets, $10 K Finco January 17, 2022 2/16: Lends $10 K 2/15: Lends $10 K What are the priorities? Bank 2 8

Ver 1 Answer n Priorities Should be Clear u. Bank 1 January 17, 2022 over Finco over Bank 2 9

Ver 2 Answer n Priorities Should be Clear u. Bank 2 is a creditor of Bank 1, not Debtor u. Finco and Bank 1 are both creditors of Debtor u. Bank 1 has priority over Finco, both for the 1/1 loan and the 2/16 loan u. See 9 -204 on future advances January 17, 2022 10

TTYN (1 of 2) 3‑ 5: Secured Creditors and Agents Debtor 1/1: $ SC January 17, 2022 Has either secured creditor perfected? 1/1: $ 3/1 FS: Holdco 2/1 Appointed Collateral Agent SC 11

TTYN (2 of 2) Lending Groups: Version 3 1/1: SA/FS: All Assets Debtor 1/15: SA, FS: All Assets, $ 2/15: Lends $ per Agent 1/1: Lends $ per Agent Finco January 17, 2022 Agent Bank 1 What are the priorities? Bank 2 12

3 -5: Answer n See 9 -503: Official Comment 3 u. Debtor creates a security interest in favor of Bank X, Bank Y, and Bank Z, but not to their representative, the collateral agent (Bank A). The collateral agent is not itself a secured party. See Section 9 -102. January 17, 2022 13

3 -5: Answer u. Under Sections 9 -502(a) and 9 -503(d), however, a financing statement is effective if it names as secured party Bank A and not the actual secured parties, even if it omits Bank A’s representative capacity. January 17, 2022 14

Ver 3 Answer n Priorities Should be Clear u. Agent is not a creditor of Debtor u. Bank 1 and Bank 2 will be able to claim priority over Finco u. Bank 1 and Bank 2 will be at the same priority as to each other January 17, 2022 15

2001 SA between Oak Rock and IDB n Collateral Definition u“the following properties, assets and rights of the [Debtor], wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter called the ‘Collateral’)”: January 17, 2022 16

2001 SA between Oak Rock and IDB n Collateral Definition u“all personal and fixture property of every kind and nature including, without limitation, all goods (including inventory, equipment and any accessions thereto), instruments (including promissory notes), documents, accounts (including healthcare insurance receivables), chattel paper (whether tangible or electronic), January 17, 2022 17

2001 SA between Oak Rock and IDB n Collateral Definition u“deposit accounts (whether or not maintained at the Bank), letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, financial assets, securities and all other investment property, supporting obligations, any other contract rights or rights to January 17, 2022 18

2001 SA between Oak Rock and IDB n Collateral Definition u“the payment of money, insurance claims and proceeds, tort claims and all general intangibles, including, without limitation, all tax refunds, payment intangibles …” January 17, 2022 19

2001 FS as to Oak Rock in favor of IDB n July 31, 2001 Delaware u“All of Debtor’s now owned and hereafter acquired assets, including without limitation all accounts, goods, inventory, equipment, instruments, documents, chattel paper, deposit accounts, letter of credit rights, commercial tort claims, financial assets, securities, and all other investment January 17, 2022 20

2001 FS as to Oak Rock in favor of IDB n July 31, 2001 Delaware u“property, general intangibles and all supporting obligations and products and proceeds of the foregoing. ” January 17, 2022 21

The Effect of a Filed FS n 9 -502, Comment 2 u“Notice filing has proved to be of great use in financing transactions involving inventory, accounts, and chattel paper, because it obviates the necessity of refiling on each of a series of transactions in a continuing arrangement under which the collateral changes from day to day. ” January 17, 2022 22

The Effect of a Filed FS n 9 -502, Comment 2 u“However, even in the case of filings that do not necessarily involve a series of transactions (e. g. , a loan secured by a single item of equipment), a financing statement is effective to encompass transactions under a security agreement not in existence and not contemplated at the time the notice was filed, ” January 17, 2022 23

The Effect of a Filed FS n 9 -502, Comment 2 u“if the indication of collateral in the financing statement is sufficient to cover the collateral concerned. ” January 17, 2022 24

The Effect of a Filed FS n 9 -502, Comment 2 u“Similarly, a financing statement is effective to cover after-acquired property of the type indicated and to perfect with respect to future advances under security agreements, ” January 17, 2022 25

The Effect of a Filed FS n 9 -502, Comment 2 u“regardless of whether after-acquired property or future advances are mentioned in the financing statement and even if not in the contemplation of the parties at the time the financing statement was authorized to be filed. ” January 17, 2022 26

Oak Rock Financial 2001: SA/FS: All Assets, $ IDB Debtor ? ? ? (auto perfected sales) Participants January 17, 2022 Agent 2006: UCC Assignment 2006: Lends $ IDB What are the priorities? 2006: Lends $ BL 27

Answer n The Effect of the Assignment u. The only real difference here vs. before is the assignment between IDB and Agent IDB January 17, 2022 28

9 -514 on Assignment n 9 -514(b) u. Except as otherwise provided in subsection (c), a secured party of record may assign of record all or part of its power to authorize an amendment to a financing statement by filing in the filing office an amendment of the financing statement which: January 17, 2022 29

9 -514 on Assignment n 9 -514(b) u(1) identifies, by its file number, the initial financing statement to which it relates; u(2) provides the name of the assignor; and u(3) provides the name and mailing address of the assignee. January 17, 2022 30

9 -514 Comments n Consequence of Assignment u“Upon the filing of an assignment, the assignee becomes the ‘secured party of record’ and may authorize the filing of a continuation statement, termination statement, or other amendment. ” January 17, 2022 31

9 -512(c) on Amendments and Adding Collateral n 9 -512(c) u. A financing statement that is amended by an amendment that adds collateral is effective as to the added collateral only from the date of the filing of the amendment. January 17, 2022 32

TTYN 3 -6: When Is Agency Determined? Debtor 2/1: $10 K SA: EQ, for all debts owed N and HA FS: EQ, SP: Bank January 17, 2022 2/15: SA, FS: EQ $10 K 3/5: SA, FS: EQ $10 K 4/5: Bank agrees to act as Creditco’s collateral agent Finco 4/15 How split EQ worth $20 K? Creditco 33

Answer n Conflict? u. Compare Oak Rock Financial with Fretz (we haven’t seen this yet) January 17, 2022 34