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What is a Security Trustee?

What is a Security Trustee?

A Security Trustee is normally appointed by a Loan Note issuer for the benefit of Loan Note holders to safeguard the interests of Loan Note holders. A Security Trustee is independent of the issuer and normally has the ability, if required, to take control of the issuer’s underlying assets on behalf of the  Loan Note holders, if the issuer was to be in default on payments due and payable under the Loan Note Instrument. This structure avoids granting security separately to all creditors which would be costly and impractical.

A Security Trustee is not a guarantor of the obligations of the issuer under the Loan Note Instrument.

A Security Trustee is reliant on the issuer to provide it with the relevant information or on Loan Noteholders to notify it of default. If a Security Trustee is not aware of a default event, then they will not be in a position to enforce the provisions in a Security Trustee Agreement. If a Security Trustee is required to exercise its powers under a debenture or a charge, it will appoint a receiver who will then liquidate issuer’s underlying assets to repay creditors. Fees are likely to be applied if this course of action is taken. Loan Note holders are classed as secured creditors, but certain creditors may take priority over secured creditors e.g. HMRC, Security Trustee, Receiver Fees or VAT liabilities.

Please, note that an existence of a Security Trustee does not guarantee the success of the issuer, getting your interest paid or recovering the initial amount invested. A Security Trustee merely holds charge over the issuer’s assets in trust for Loan Note holders, and can appoint a Receiver, Administrator or Liquidator in the event of default, to recover part of all the monies invested.

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Important Information

The investments referred to in this website are not suitable for all investors and are intended for certain categories of investor only. Osborne Baldwin Limited t/a Hunter Jones does not give financial advice to investors about the suitability of the investments. Investors should seek advice from a person who specialises in advising on speculative, illiquid securities. 

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