The Enhanced Equipment Trust Certificate — EETC — is a form of secured debt financing used by airlines to fund the multiple aircraft purchases or leases typically needed to keep their fleets up-to-date and state-of-the-art. Central to the EETC is the role of the depositary holding the debt proceeds for funding the respective aircraft deliveries.
To be eligible as a depositary, an institution is required to demonstrate the highest debt rating handed down by both Moody's and Standard & Poor's. In the wake of the global financial crisis, however, a number of potential depositaries were downgraded; some others that might have qualified on ratings lacked requisite skills in some cases and sufficient capabilities in other cases. So when the lead underwriters on a purchase of 16 new aircraft had arranged the deal and lined up the investors, they found themselves looking around for a sound and stable depositary.
They didn't have to look far. BNY Mellon had the ratings, and its Corporate Trust division had the depositary services expertise and the innovative resourcefulness to complete the transaction. With BNY Mellon Corporate Trust as depositary, the deal closed, and the aging fleet got its upgrade.
It's a small, highly specialized U.S. government agency that does essential work. So when it was determined that the trustee reporting for its capital financing program was lacking in terms of accuracy and timeliness, the staff decided to put out a Request for Proposal and make a change.
Answering the call was a partnership that billed itself as "two companies, one voice." One of the companies was a minority-owned investment bank, which would handle underwriting and financial advisory services. The other company was the trustee the investment bank considered the best in the world, BNY Mellon Corporate Trust. Its wide experience in working with the Federal government, expertise in trust services, and unmatched financial strength made it the investment bank's clear choice. The two companies promised a single point of contact into all the capabilities of the partnership.
To the agency staff accountable for every penny of taxpayer money and needing all possible help to do the agency's important work, it was a no-brainer: time to change trustee — and go with the best.
Directed by their auditors to create a disaster recovery plan, the administrators of an institution of higher learning in the U.S. sought assistance in creating a backup contingency for data on a new issuance in their debt portfolio. Although not the institution's traditional debt trustee, BNY Mellon Corporate Trust came up with a creative and innovative solution that earned the division the trusteeship of the new issuance.
Right on the bank's own Investor Reporting website, the client academic institution posts its electronic files containing all the governing documents, debt service information, and statements on the new issue. This secure data is accessible only to the institution's financial personnel but is readily available should a disaster ever compromise records housed at the institution itself.
When the government of a small but prosperous island nation agreed to guarantee shares issued by its biggest bank, the role of the trustee became particularly crucial. At stake was the bank's ability to raise capital in the adverse environment of the global financial crisis. To the bank issuing the shares, to the government guaranteeing them, and to investors buying them, it was essential that the chosen trustee demonstrate both the know-how to process any and all claims and the financial stability that generates confidence.
BNY Mellon Corporate Trust met both criteria.
And when the division's staff scrutinized the documents of the structure and discovered — 24 hours before the scheduled closing — that the local transfer agent was unable to provide the services required, they were able instantly to mobilize the bank's own resources to provide the agent services specified and, at the eleventh hour, rescue the transaction from further delay. It wasn't just expertise; it was the range of expertise the division was able to deploy — and its ability to turn on a dime to deploy it.
When the borrower of a multiple-tranche loan from a 320-lender syndicate was forced to restructure the debt, it spelled trouble for the role of agent, which had been filled by the syndicate's lead arranger. The restructuring process made it clear that the various lender groups in the syndicate had different priorities. The restructuring interests of senior lenders differed from those of mezzanine lenders, whose interests in turn differed from the interests of second-lien lenders. Citing clear conflict of interest, the agent resigned from representing all but the senior loan financing, and the syndicate suddenly found it needed replacement agents for the lender groups for the two other tranches.
Attorneys for several of the second-lien lenders recommended BNY Mellon Corporate Trust. As the pioneer in the field and the largest third-party administrative agent in the industry, it was the obvious go-to provider. Perhaps more important was BNY Mellon Corporate Trust's well recognized independence; it meant the division could represent the lender groups of not just one but both financings — mezzanine and second-lien — thereby providing a single solution for multiple lenders' multiple needs.
The Bank of New York Mellon Corporation and its subsidiaries may lend and provide other products and services to securities issuers and others, and provide and receive related fees and compensation related thereto.
When the collapse of Lehman Brothers sent ripples of uncertainty throughout the bond market, one product that looked like it might be swamped was catastrophe bonds — cat bonds, the reinsurance alternative that transfers insurers' disaster-driven losses to investors. Unsure how to track underlying collateral, investors suddenly seemed to have lost confidence in the very structure of these instruments. Without that confidence, the cat bonds' credit risk just looked too high, and insurers worried they had lost this valuable means of financing.
Enter the savvy, innovative, and flexible professionals of BNY Mellon Corporate Trust. Working with two separate insurance bond issuers in the first half of 2009, they enhanced the cat bond structure, initiating a new standard of transparency and establishing procedures for effecting the standard. With Web site reporting on certain aspects of the bond's collateral assets, investors had the clarity and transparency they sought — and cat bonds were back in business.
A large European financial institution was sufficiently plagued by distressed assets on its books that it asked the central bank of its home country to step in. Under the terms agreed, the central bank would create a master fund comprising five grantor trusts and one LLC as buyers of the distressed assets. The financial institution's balance sheet risk would thus be minimized, and the master fund would securitize the assets to capitalize the equity.
All that was needed — and it was needed fast — was a trustee with three attributes: adequate financial strength, the full range of varied capabilities required to structure and administer the master fund, and the kind of global reach and local expertise that would enable it to step in quickly and do the job right.
BNY Mellon Corporate Trust met all the qualifications. In a short period of time, the division was serving as trustee, master servicer, and data aggregator of the fund. A legendary European financial institution's balance sheet was stabilized, its capital ratios strengthened, its longevity and effectiveness reclaimed.
When a large government purchaser of U.S. whole-loan mortgages needed to reduce costs and avoid capital outlays, it decided that one good way to do so would be to outsource its document custody function.
But there were challenges.
First, the document custodian would have to produce a series of customized reports to accommodate rigorous mortgage market controls. Second, the amount of files involved was huge — several million. In addition, speed was of the essence: the government agency needed to transfer the first million files within three months! Speed, volume, and customized services: a tall order for any document custodian.
Because of its wide-ranging experience in serving government agencies, BNY Mellon Corporate Trust was appointed by this government purchaser. A dedicated team from the division quickly put together all needed capabilities in an innovative solution that met — and exceeded — the challenges. The solution comprised document custody and tracking, the review and certification of all documents, safekeeping, and loan-level and aggregate performance tracking across the portfolio.
As for the first million files that needed to be moved in three months, the team got the job done in less time than that.
A key provision of the American Recovery and Reinvestment Act of 2009 — a core stimulus initiative of the U.S. economy — is the issuance of Qualified School Construction Bonds to fund the building, rehabilitation, or repair of public school facilities in districts with a demonstrated need for additional resources. When the first district ever to issue this new type of financing sought a paying agent for the transaction, both the district administration and its investment bank looked to the agent with proven expertise in tackling new categories of bonds — namely, the Corporate Trust division of BNY Mellon.
The bond structure provides tax credits rather than paying interest and since the tax credits may be traded separately, BNY Mellon Corporate Trust will serve as registrar and transfer agent as well. In addition, special quarterly reporting procedures have been put in place for notifying the Depository Trust Corporation about expiring tax credits.
The school district and its investment underwriter were confident that BNY Mellon Corporate Trust could develop the right processes and procedures for their needs — and make it all work.
They were right.