Credit quality
Coverage tests, collateral discipline and FX protection.
Asset Coverage Ratio and Cash Coverage Ratio, the covenant package and the two-layer currency protection behind the senior secured notes.
Institutional-grade protection.
The covenant package — the Asset and Cash Coverage Ratios, Event of Default triggers, the FX hedge and the reserve accounts — is documented to institutional ABS standards.
What secures the bonds
Borrower interests pledge
First-ranking pledge over 100% of the membership interests in the Borrower, granted by PVOne and perfected under Article 8 of the UCC. On enforcement the Security Agent transfers the Borrower as a going concern.
Loan and receivables
Security over the senior secured loan from LienFlow US Holding to the Borrower and all receivables under it, preventing leakage of portfolio proceeds outside the secured structure.
Secured accounts
First-ranking security over the Collection, Note Payment, Interest Reserve, Liquidity Reserve, FX Reserve and Costs & Taxes Accounts — all controlled by the Security Agent.
Contractual rights
Assignment or pledge of all material rights under the Servicing Agreement, Account Bank Agreement, hedging documents and Back-up Servicing Agreement.
The two coverage tests
Both ratios are tested on each quarterly Calculation Date. A breach traps cash long before it becomes an Event of Default.
Collateral cover
Property value securing the portfolio after haircut, plus the Liquidity and FX Reserves, divided by notes outstanding.
- Floor
- 4.25x / 4.50x
- Base case min.
- 5.48x
- Value fall tolerated
- ~18%
Cash cover
Reserves, issuer cash and trailing four quarters of collections, divided by four quarters of senior obligations plus liquidity window capacity.
- Floor
- 1.10x / 1.25x
- Base case min.
- 1.11x
- Window closes below
- 1.00x
Liquidity windows. Quarterly, capped at 5% of principal outstanding, opening no earlier than the fifth interest payment date. The amount is determined mechanically as the lesser of the cap and the excess of collections over senior obligations, and is zero while the Cash Coverage Ratio is below 1.00x. The Calculation Agent has no discretion to increase it.
What triggers enforcement — and what happens
| Trigger | Threshold | Grace / cure | Consequence |
|---|---|---|---|
| Asset Coverage Ratio breach | Below 4.50x (4.25x during ramp-up) | 4 quarters | Cash trap, no reinvestment or distributions; acceleration if uncured |
| Cash Coverage Ratio breach | Below 1.25x (1.10x while drawing) | 4 quarters | Cash trap; liquidity window closes automatically below 1.00x |
| Portfolio balance | WA LTV above 35% | 2 consecutive quarters | Immediate acceleration |
| Cumulative losses | Above 5% of portfolio RV | None — immediate | Immediate acceleration |
| Foreclosure rate | Above 15% of portfolio | 6 months sustained | Acceleration |
| Servicer failure | No backup servicer within 60 days | 60-day cure | Automatic Event of Default |
| Reporting failure | 2 consecutive months missed | None — immediate | Automatic Event of Default |
What happens in a default
Transfer of the Borrower
Enforcement runs against the membership interests pledged by PVOne and perfected under UCC Article 8. The Borrower transfers as a going concern, the lien certificates stay registered in its name, and no county-level reassignment is required.
Certificate by certificate
Security taken over the liens themselves would require thousands of individual certificate transfers across seventeen states and DC, county by county, before any recovery could begin.
Bankruptcy-remote
Independent manager vote required for any insolvency filing, separateness covenants, no other debt, non-consolidation opinion from US counsel.
Full member, not assignee
On enforcement the transferee is admitted as a full member with voting and management rights.
Servicer replaced directly
The Security Agent can replace the Servicer without going through any other party.
Documents pre-signed
Transfer powers, manager resignations and county powers of attorney held in escrow.
Hot back-up servicer
A hot back-up servicer receives the full asset tape monthly.
Condition precedent
The non-consolidation opinion is a condition precedent to first drawdown.
How EUR bondholders are protected from USD/EUR movements
FX Reserve Account
2% of closing USD portfolio Redemptive Value held in an EUR-denominated reserve each quarter, funded from the waterfall before coupon payment. No bank counterparty required.
Rolling FX forwards
80% of USD portfolio exposure hedged by rolling EUR/USD forward contracts. Cost is passed through the Borrower as an expense (net P&L zero for LienFlow). Requires an ISDA/CSA framework with an EU bank.
Once the hedge is active, the unhedged 20% is covered by the FX Reserve. The Calculation Agent verifies both coverage ratios on each quarterly Calculation Date, including the FX-adjusted portfolio value.
Contact
Let's talk.
Documentation — Information Memorandum, business plan model, PVOne servicer reports, BMCP engagement letter and Articles of Association — is available under NDA on request to professional clients.
Martin Bodocký
LienFlow a.s.