FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

same criteria as apply to the Secured Properties so as to try to ensure that any failure to insure or under
insurance would not adversely affect the ability fully to realise a claim in respect of any of the Secured
Properties. If, notwithstanding these undertakings by the Borrowers (which the Borrowers are not
themselves able to control), other properties are insured under the Generali policy on terms that are not
consistent with the criteria required in respect of the Secured Properties, any claim by a Borrower under
such policy may not be met in full as Generali will be entitled to reduce claims in proportion to any
under-insurance across all the properties covered by the policy.
In respect of the five Secured Properties where the Occupational Tenants or the syndic de co-propriété are
responsible for insuring such properties, the Borrowers must use all reasonable endeavours to procure
that the relevant Occupational Tenants or syndic de co-propriété effect insurance comparable to that
required to be effected by the Borrowers on the terms prescribed by the relevant Occupational Lease.
Generally, the Occupational Leases grant the parties the option, if the Secured Property is destroyed or
damaged by an insured risk so as to make the relevant unit wholly unfit for occupation or use, to terminate
the Occupational Lease if works necessary to make the premises fit for occupation and use have not been
completed within a certain period (usually the period in respect of which the Obligors have the benefit
of loss of rent insurance). Typically, the Occupational Tenants are not required to pay the annual rent or
pay insurance charge or service charge (or a proportion of them) after the date of destruction or damage
until the reinstatement works have been completed or, (in some but not all Occupational Leases) if earlier,
the expiry of the period for which loss of rent insurance is maintained. Insurance cover has been taken
out in respect of the Secured Properties to cover the shortfall of rent whilst such works are being carried
out for a period which differs for each of the Secured Properties but which is currently not less than two
years. Under certain Occupational Leases, the landlord and/or the tenant have the right to terminate the
lease if the premises have not been reinstated within a specific period.
If reinstatement of the relevant Secured Property does not take place, then the proceeds of any monies
paid out under the terms of the insurance policy effected in respect of the Secured Property will be paid
to the relevant Borrower except in certain cases where the Occupational Tenant may be entitled to receive
certain sums in respect of items which it has installed at its own expense but which have nevertheless
become part of the premises as a matter of property law.
Each Borrower must apply all monies received under any insurance policy in the event of total destruction
of a Secured Property or in the event of partial destruction of a Secured Property resulting in a loss of use
of 30 per cent. or more of the useable surface area of the relevant Secured Property for a period of at least
three months towards replacing, restoring or reinstating the relevant Secured Property subject to certain
conditions (see ‘‘Summary of Principal Documents – The Commercial Mortgage Loan Agreements –
Prepayment of the Commercial Mortgage Loans’’) or (if not) towards prepayment of the relevant
Commercial Mortgage Loan (which must in any event be prepaid if reinstatement works have not been
completed within the earlier of (i) 12 months of receipt of such insurance proceeds and (ii) 24 months of
the relevant damage or destruction). In the event of partial destruction of a Secured Property resulting
in a loss of use of less than 30 per cent. of the useable surface area of the relevant Secured Property, or
if the loss of use lasts for a period of less than three months, the relevant insurance proceeds will be
released to the relevant Borrower by the Management Company, provided that the Borrower undertakes
and to complete the necessary repair works in accordance with the conditions set out in the Commercial
Mortgage Loan Agreement.
There is a risk that if either the relevant Borrower or the relevant party with the obligation to reinstate
the relevant Secured Property is unable to reinstate, the proceeds of such insurance due to the relevant
Borrower, together with the proceeds from the sale of the land, might not be sufficient to permit the
relevant Borrower to meet its outstanding obligations under the relevant Commercial Mortgage Loan
Agreement and therefore, ultimately, the Issuer’s ability to make payments under the Notes may be
adversely affected.
If a claim is made under an insurance policy, but the relevant insurer fails to make payment in respect of
that claim, this could prejudice the ability of the relevant Borrower to meet its outstanding obligations
under the relevant Commercial Mortgage Loan Agreement and therefore, ultimately, the Issuer’s ability
to make payments under the Notes may be adversely affected.
The Commercial Mortgage Loan Agreements and Occupational Leases also contain provisions requiring
the Borrowers to carry or procure the carrying of insurance with respect to the Secured Properties in
accordance with the specified terms. There are, however, certain types of losses (such as losses resulting
from war, terrorism (which, in relation to terrorism, within certain limits, is currently covered by the
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