Featherweight securities to mitigate administration risk

When a borrowing company goes into administration, lenders will want to enforce their security immediately. However, administration risk delays lenders from enforcing their security during the moratorium period without leave from the court or consent from the administrator.

This article provides an insight into administration risk, explains ways to mitigate administration risk and how featherweight securities can be effectively used.

When a grantor becomes insolvent, a secured creditor may be able to claim their rights in the secured assets through external administration. In order to enforce security interests, lenders must ensure that the interest is perfected. When a borrower goes into administration, lenders are only able to enforce their security in limited circumstances during the moratorium period. The moratorium period occurs throughout the duration of the administration and temporarily prevents court or enforcement proceedings against the company or its