FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
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infrastructure and the age and facilities of the building in comparison to the alternatives are all examples<br />
of factors which influence tenant demand.<br />
Similarly, changes to the infrastructure, demographics, planning regulations and economic circumstances<br />
relating to the surrounding areas on which the relevant Secured Property depends for its tenant base may<br />
adversely affect the demand for such Secured Property.<br />
Statutory rights of Occupational Tenants<br />
The Occupational Tenants, under Occupational Leases entered into in relation to the Secured <strong>Properties</strong>,<br />
may be released from the performance of their obligations under the Occupational Leases when external<br />
unavoidable and unforeseeable events (‘‘force majeure’’ events) make the performance of their<br />
obligations impossible.<br />
A number of statutory rights of tenants under the Occupational Leases may affect the net cash flow<br />
realised from the Secured Property or cause delay in the payment of the rental income. In particular:<br />
(a) where the Borrower as landlord is in default of its obligations under a Occupational Lease, the tenant<br />
may have the right under general principles of French law (principe d’exception d’inexécution) to<br />
withhold its rental payments until the default is cured or to refrain from performing its other<br />
obligations thereunder;<br />
(b) a legal right of set-off (droit de compensation légale) could be exercised by a tenant of the Secured<br />
Property in respect of its rental obligations under the relevant Occupational Lease if a reciprocal debt<br />
is owed to such tenant by the Borrower as landlord or otherwise;<br />
(c) a Court may grant time to a tenant in respect of its payment obligations under an Occupational Lease.<br />
In doing so the Court will take into account the financial standing and needs of the Borrower as<br />
landlord. Alternatively, the court may reschedule the debts of a tenant (in both cases not in excess of<br />
two years), treating the extension of time as a matter of procedural law governed by Articles 1244-1,<br />
1244-2 and 1244-3 of the French Code civil, thus disregarding any provision of an Occupational Lease<br />
to the contrary;<br />
(d) a tenant who has legitimately carried out a business (fonds de commerce) at the Secured Property for<br />
the three years preceding the expiry of the Occupational Lease and who is registered at the French<br />
trade and company registry acquires, subject to certain administrative conditions, a protected<br />
leasehold right and is entitled to the renewal of the lease (droit au renouvellement) upon its expiry or<br />
to compensation for eviction (indemnité d’éviction) should the landlord elect not to renew the<br />
Occupational Lease. The compensation consists of (i) an amount corresponding to the market value<br />
of the fonds de commerce, which is determined in accordance with local standard business practices<br />
and methods based mainly on operating profit and (ii) additional amounts relating to moving costs,<br />
disruption of business, redundancy of staff, etc. Compensation is not payable, however, if the tenant<br />
is in serious breach of its obligations under the Occupational Lease.<br />
The exercise of any such rights may have an adverse effect on the amount of income capable of being<br />
generated from the Secured <strong>Properties</strong>, which in turn could adversely affect the ability of the Borrower<br />
to meet its obligations under the relevant Commercial Mortgage Loan and which in turn may result in the<br />
receipt by the Noteholders, or the holders of certain classes of Notes, of a principal repayment less than<br />
the face value of their Notes and the Issuer may be unable to pay interest due on the Notes in full.<br />
Insolvency risk in respect of Occupational Tenants<br />
If an Occupational Tenant were to enter into French insolvency proceedings, the relevant Borrower<br />
would be prohibited from taking any action against the Occupational Tenant for recovery of sums due or<br />
re-entry to the relevant premises. If an Occupational Tenant were to enter into insolvency proceedings<br />
regulated other than by French law, the relevant Borrower may also be prohibited from taking similar<br />
actions if and to the extent that the French courts were to recognise and give effect to such proceedings.<br />
If the Occupational Tenant is still trading at the premises or has plans to recommence trading with a view<br />
to the survival of the company as a going concern, it is possible that the court would refuse to grant such<br />
leave to re-enter to the landlord on the grounds that to do so would frustrate the purpose of the<br />
administration and, furthermore, that the court would do so notwithstanding the administrator was only<br />
paying a reduced rent, or even no rent, under the terms of the relevant Occupational Lease.<br />
Market risks on enforcement<br />
In the event of enforcement of any Obligor Security, it may be necessary to sell the relevant Secured<br />
Property. Only the proceeds from enforcement of the security in respect of Secured <strong>Properties</strong> comprised<br />
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