Chapter 3 Administration of an estate where timely payment can be made from the cover pool
Section 14 Timely payment etc
The bankruptcy administrator shall ensure proper management of the cover pool to secure the assets in the cover pool. The bankruptcy administrator shall also ensure that the provisions concerning the composition of the cover pool and the provisions concerning liquidity, currency and interest rate risk are complied with on a continuous basis.
The bankruptcy administrator and creditors’ committee shall ensure that holders of covered bonds receive agreed and timely payment from assets encompassed by their preferential claim as provided in the Financial Institutions Act section 2-35 third paragraph.
Bankruptcy or negotiation of debt or public administration of a mortgage credit institution shall not in itself be sufficient cause for termination or similar remedy by holders of covered bonds. Neither may actions as mentioned in the Financial Institutions Act section 2-30 be undertaken or carried out. In the case of forced recovery this also applies after the expiry of the period stated in Bankruptcy Act section 117 third paragraph, cf. section 17 second paragraph. This does not prevent derivative contracts as mentioned in the Financial Institutions Act section 2-28 first paragraph e), which meet the requirements of section 8 of these regulations, from continuing to run in accordance with their terms so that agreed set-off of cash flows in the same currency and with the same maturity date can be undertaken between the parties in the same cover pool. Neither, in relation to derivative contracts as mentioned in section 8, does this prevent the bankruptcy administrator and creditors’ committee from agreeing with a derivative counterparty to replace one or more ongoing derivative contracts with one or more new such contracts, so long as the asset coverage requirement under the Financial Institutions Act section 2-31 and the liquidity requirement under section 2-32 are met.
The bankruptcy administrator and creditors’ committee may take any action considered necessary to redeem preferential claims over the cover pool, including selling assets and issuing new bonds and derivative contracts conferring a preferential claim. The bankruptcy administrator and creditors’ committee shall as soon as possible inform holders of covered bonds of decisions assumed to be of material significance to them.
Section 15 Estate’s disposal over the cover pool
The bankruptcy administrator and creditors’ committee may dispose over assets included in the cover pool solely for the purpose of meeting the requirement of timely payment.
If deemed necessary in the interests of the other creditors’ ability to enforce a claim, the bankruptcy administrator and creditors’ committee may none the less sell the entire cover pool provided the proceeds obtained provide at minimum full satisfaction to holders of covered bonds.
Full satisfaction means settlement of interest rate contracts and foreign exchange contracts at market value based on pricing of comparable interest rate contracts and foreign exchange contracts. Full satisfaction in respect of bond issues entails settlement of all accrued interest and charges as well as agreed future cash flow (principal and interest) up to the ordinary maturity date, discounted at the market rate for comparable bonds in the relevant currency.
Section 16 Estate’s assumption of the debtor’s position in derivative contracts
The bankruptcy estate shall without specific decision assume the debtor’s position in the debtor’s derivative contracts as mentioned in the Financial Institutions Act section 2-28 first paragraph e). The other party shall not be entitled to invoke insolvency as a ground for termination based on the nature of the contract.