Quasi-securities

Explore the nuanced concept of quasi-securities, arrangements that, while not formal security interests, offer lenders significant economic protections. This guidance note unpacks how quasi-securities function to safeguard lending positions and enhance repayment prospects in complex financing scenarios.

Topics Covered

• Negative pledges
• Guarantees
• Subordination arrangements
• Priority arrangements
• Letters of comfort
• Set-off rights

Essential Insights

• Understand why quasi-securities grant rights against providers, not directly over property, distinguishing them from security interests.
• Assess the strategic value and limitations of negative pledges in unsecured lending contexts and their enforcement challenges.
• Recognise the strict legal interpretation of guarantees and the critical compliance requirements under the National Credit Code.
• Evaluate how subordination and priority deeds structure creditor repayment order and potential PPSA registration implications.
• Consider the binding versus non-binding nature of letters of comfort and the legal risks of ambiguous drafting.
• Navigate the various forms of set-off rights, including legal, equitable, contractual, and insolvency set-off, and their impact on creditor claims.