Purchase Money Security Interests Research Articles

Purchase Money Security Interest Refinancing in New Zealand: A Case for Retention of Super-Priority

This article concerns the issue of purchase money security interest (PMSI) refinancing. Under current law, PMSI super-priority is lost on refinance regardless of whether the refinancier is the original PMSI holder or a third party financier. This article contends that such a position is uncommercial and frustrates the undergirding objective of the law of debt security to facilitate the provision of credit to business. This position is supported by theory, international treatment of the issue and policy.

Purchase Money Security Interest Refinancing in New Zealand: A Case for Retention of Super-Priority

This paper concerns the issue of purchase money security interest (PMSI) refinancing. Under current law, PMSI super-priority is lost on refinance regardless of whether the refinancier is the original PMSI holder or a third-party financier. This paper contends that such a position is uncommercial, and frustrates the undergirding objective of the law of debt security to facilitate the provision of credit to business. This position is supported by theory, international treatment of the issue, and policy. Part I introduces the law in New Zealand. Part II explains the legislative purpose behind PMSI super-priority. Part III surveys the relevant comparative law in Australia, Canada and the United States. Part IV contends that a legislative amendment of ss 16 and 73-75 of the PPSA is the best method of recognising a refinancier’s legitimate right to super-priority.

Security interests in intellectual property: proposals for reform

This paper considers some of the difficulties arising from how English law conceptualises certain types of security interests over IPRs, and the problems arising from dual registration systems. This analysis is informed by a critical comparison of the current English doctrine, alongside the US system and the proposals from UNCITRAL. It is argued that attempts to regulate a world of integrated goods (whereby goods and software are inextricably interconnected), through unintegrated regimes of legal governance of security interests over goods and IPRs, is unsustainable. It will thus be argued that reform of security interest law generally (to bring about a functional system of security) and a single register for security interests whether over goods or IPRs is necessary. Specific recommendations to deal with problems concerning purchase money security interests, and third-party purchasers, are put forward.

The Floating Charge is Dead; Long Live the Floating Charge -- A Canadian Perspective on the Reform of Personal Property Securities Law

This paper assesses the impact and implications of the death of floating charge theory in PPSA regimes on the priority status of the first in time all assets security holder. I focus on two classes of creditors' claims to which the floating charge has traditionally been vulnerable: subsequent purchase money security interests (PMSIs) and subsequent unsecured and preferential creditors. As we shall see, PPSA reform has greatly strengthened the position of the floating chargee, a trend which has provoked an intensive re-examination of the policy merits of full priority for secured creditors generally. In the conclusion, I summarise the case for preserving the functional premise underpinning the equitable institution of the floating charge in the pursuit of statutory reform. This was the hope m ill-founded as will be seen -- that the traditional vulnerability of the floating chargee to subordination to pre-crystallization creditors would provide the holder of an all assets security interest with a significant incentive to monitor the debtor's dealings with circulating collateral and to intervene to terminate a financially troubled debtor's business operations in a timely fashion.

(Mis)use of State Law in Bankruptcy: The Hanging Paragraph Story

This article addresses the use of state law in bankruptcy in the context of the controversial “hanging paragraph” of the Bankruptcy Code, which was added to the Code by the 2005 amendments. The hanging paragraph appears to grant undersecured car lenders full payment in Chapter 13 bankruptcy cases, treatment that gives such lenders better treatment than other secured lenders. The provision is particularly controversial when applied to negative equity financing. Negative equity financing is provided by lenders when a car buyer offers a trade-in vehicle that is worth less than the outstanding loan that it secures. When a lender makes a negative equity loan, it is undersecured on the day the loan is made.Whether a negative equity loan is entitled to full payment under the hanging paragraph turns on the definition of “purchase money security interest,” a term that is used but not defined in the Bankruptcy Code. The majority of all courts that have addressed the issue, as well as all nine of the Circuit Courts of Appeal that have done so, considered the term to be defined by state law, relying on a 1979 Supreme Court case, Butner v. United States. In this Article, I explain why state law should not define the term purchase money security interest for hanging paragraph purposes.To do so, I propose a framework for analysis that is based on the difference between bankruptcy entry rights and bankruptcy exit rights to show that an analysis that relies only on Butner to determine the appropriate use of state law in bankruptcy is incomplete. This entry/exit framework requires a detailed examination of the package of rights inherent in any property interest in order to determine whether that right is one that bankruptcy policy should respect. I then explain that because a purchase money security interest in a consumer good (such as a car subject to the hanging paragraph) refers only to a bankruptcy exit right, it should be defined according to federal law, following another 1979 Supreme Court case, United States v. Kimbell Foods. I conclude by proposing a bankruptcy policy-based definition of purchase money security interest for hanging paragraph purposes.

The Functional Equivalence of Purchase Money Security Interest in Civil Law: An Intimate Model for Ethiopian Law of Security Interests

The Functional Equivalence of Purchase Money Security Interest in Civil Law: An Intimate Model for Ethiopian Law of Security Interests

Securing Truck Fleet Financing

Article 9 of the Uniform Commercial Code provides guidelines for securing collateral. Lending institutions utilize these provisions in order to ensure that they will be secured in the collateral of the debtor in case of default or bankruptcy. Specifically, this paper will examine filing against attachments to avoid being unperfected, procuring agreements in order to retain first priority (Intercreditor/Subordination Agreements), perfecting when the primary lender will not cooperate (Purchase Money Security Interest), retaining perfection during name changes, perfection of the correct lender when subleasing, payoff and proper termination of debtor obligations, unique laws- titling and UCC filing required (Wyoming) and proper filing procedures concerning fleet.

The Paradox of Priority

The ubiquity of bank seniority is now a widely accepted fact in the academic literature. At the same time, trade creditors are sometimes granted a purchase money security interest in the materials or equipment they provide the firm. These two conflicting facts present a puzzle: Why would banks willingly give up a valuable priority claim on the firm, but only with respect to a subset of the firm's assets; We propose a resolution to this paradox of priority by arguing that trade creditors are better able to liquidate the materials they supply to a firm. When trade creditors have a security interest in these assets, their claims are state-contingent, and therefore dependent on the value of the assets pledged as collateral. Surprisingly, this ability of trade creditors to more efficiently liquidate the materials they supply to a firm also makes it desirable to subordinate the non-collateralized portion of their claims. Doing so increases the face value of a trade creditor's claim for a given level of borrowing, thereby increasing the liquidation bang from each trade credit buck. This combined priority structure maximizes social welfare by reducing the firm's overall cost of funding.

Defending Purchase Money Security Interests Under Article 9 of the UCC From Professor Buckley

Defending Purchase Money Security Interests Under Article 9 of the UCC From Professor Buckley