Secured and guaranteed facilities

A lender's primary concern is that it is repaid. If a borrower is unable to repay the loan or becomes insolvent, the lender may have to share the borrower's available assets with other creditors and only receive part of what it is owed as a result. Where security is provided, the lender receives an interest in the security provider's asset(s) giving it comfort that it will hopefully be able to recover amounts from the borrower in the event of the borrower's insolvency.

This guidance note looks at the considerations for both the lender and borrower when deciding whether or not security is required for a loan and considers some aspects of taking security in respect of the Personal Property Securities Act 2009 (Cth) (PPSA). It examines guarantees and indemnities, which before the PPSA were viewed as quasi security.

This guidance note also discusses how the “ipso facto” regime affects a lender’s rights to accelerate a loan, enforce its security or call on a guarantee upon the insolvency of the borrower, and outlines certain exemptions to the statutory stay on enforcing “ipso facto” clauses including the exemption for syndicated loans.

See Secured and guaranteed facilities.