It is not uncommon, in cases where a credit facility is in
default, for a third party (often with a vested interest) to
acquire the debt and related finance documents (facility agreement,
securities and guarantees). The price paid is often at a discount
to the underlying debt. A debt buyer may do this for a number of
reasons, ranging from the purely commercial (to realise the profit
from the discount) to the more tactical - to protect one or more of
the obligors (borrower or guarantors) from enforcement action by
the original financier or to give the debt buyer commercial
leverage over them.
Notice of an assignment of this type is required under State
legislation to perfect it as a legal, rather than equitable,
assignment. In some cases, one or more of the obligors will be
joined as parties to the assignment document (to give warranties as
to the existence of the debt and validity of the security) and will
therefore have notice of it without the need for anything more.
