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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Risks relating to Planning – Right of First Refusal<br />
The Certificates of Title confirm that most of the Secured <strong>Properties</strong> are situated in a pre-emption zone<br />
where the local authority holds a right of first refusal (droit de préemption urbain) upon a sale of the<br />
Secured Property. This right of first refusal only applies to direct asset sales.<br />
The right of first refusal may be exercised by the local authority within a two-month period following the<br />
mandatory filing of the offer for sale of the Secured Property and for a different price than the offered<br />
price. The local authority must inform the seller if it chooses to exercise its right of first refusal, in which<br />
case the Seller may choose not to proceed with the sale or may request a judicial determination of the<br />
acquisition price.<br />
Risks relating to the existing Finance Leases<br />
Eighteen Finance Leases have been entered into between 4 of the Borrowers (Paris Provinces <strong>Properties</strong><br />
SCI, <strong>Proudreed</strong> France SARL, IDB Immobilier SAS and Beaulieu <strong>Properties</strong> SCI), as finance lessees and<br />
third-party finance lessors with respect to properties that are not included in the Property Portfolio. In<br />
accordance with standard market practice, none of the Finance Leases contain provisions limiting the<br />
recourse of the finance lessors against the finance lessees or their respective assets. Therefore, as an<br />
unsecured creditor, each finance lessor benefits from a general right of recourse (droit de gage général)<br />
against all the assets of the relevant finance lessee (in addition to the title which each finance lessor retains<br />
over its property until the finance lessee exercises its purchase option). In addition, with respect to two<br />
Borrowers (Beaulieu <strong>Properties</strong> SCI and Paris Provinces <strong>Properties</strong> SCI), the general right of recourse of<br />
the finance lessor is not limited to the assets of the lessees and could extend to Paris <strong>Properties</strong> SARL by<br />
reason of the unlimited liability nature of the lessees’ corporate form. Under French law, an SCI is an<br />
unlimited liability company (although such liability is not joint and several) such that a creditor may, in<br />
addition to the assets of the company, have recourse to the assets of the shareholders of the company.<br />
All Finance Leases provide the finance lessor with an automatic termination right following any breach<br />
by the finance lessee of its obligations under the Finance Lease (including, among other things, non<br />
payment of rent or failing to deliver a compliance certificate). Following notice to the finance lessee of a<br />
breach, the finance lessor may: (i) cancel the Finance Lease; and (ii) require repayment of all or part of<br />
the outstanding non-amortised amount of the capital invested by the finance lessor at the date of<br />
termination, and/or the payment of a penalty by the finance lessee to the finance lessor.<br />
To reduce the risk of a breach under the Finance Leases and to prevent the finance lessors from pursuing<br />
the rights described above, all rents due to the finance lessors will rank in priority to the payment of<br />
interest and principal under the Commercial Mortgage Loans in the relevant Obligor Priority of<br />
Payments, and each relevant Borrower will create a cash reserve which will be credited to its Finance<br />
Lease Reserve Account (see the section entitled ‘‘Borrowers Finance Lease Reserve Account’’). Currently,<br />
the annual rental income on the properties subject to the Finance Leases in respect of each Borrower<br />
Group exceeds the annual amounts payable under the relevant Finance Leases. The relevant Borrowers<br />
will represent and warrant on the Closing Date that there is no breach under the Finance Leases.<br />
The Finance Leases provide the finance lessees with the option to purchase the relevant property. Each<br />
Obligor that is a lessee under a Finance Lease will convenant, under the relevant Commercial Mortgage<br />
Loan Agreement, not to exercise a purchase option under a Finance Lease unless (i) it certifies to the<br />
Management Company that it is solvent and has immediately available funds to pay the purchase price<br />
and all related costs in full and (ii) the price is financed by means of a subordinated, intra-group loan to<br />
the relevant Obligor or out of funds standing to the credit of the relevant Borrower Junior Expenses<br />
Account.<br />
Prior Operating Histories<br />
Each of the Borrowers was formed for the purposes of acquiring (or refinancing the acquisition of) and<br />
holding its properties (including the related Secured Property). Each Borrower will represent that it has<br />
no material or contingent liabilities except for those arising under the related Commercial Mortgage<br />
Loans and as otherwise permitted by the related Commercial Mortgage Loan Agreement. Other than<br />
IDB Immobilier SAS (formed in 1974), all of the Borrowers were formed during or after 1990.<br />
Accordingly, although each Borrower will represent, among other things, that to its knowledge, as at the<br />
Closing Date, it has no actual or contingent liability relating to any of its past activities other than the<br />
purchase, financing, ownership or operation of the Secured <strong>Properties</strong> currently owned by it which, alone<br />
or together with any other liabilities, may have a material adverse effect on the ability of the relevant<br />
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