Effective Security of Creditors’ Interests
To give credit, lenders require some form of security. The legislator recognised the latter in that the Aircraft Registration Act provides for special privileges and mortgages.
Mortgages are unknown in Maltese Civil Law. Nonetheless they now form part of Maltese law solely for the purpose of putting a ship or aircraft as a security for a loan or debt. The law also prescribes that it is lawful for a mortgage to be executed and registered in favour of a security trustee. Such security trustee shall be recognised as the mortgagee and shall be entitled to exercise all the rights in relation to that mortgage.
The role of a security trustee in such a scenario is fundamental because of the huge costs involved in aircraft financing where financiers may wish to share the burden of these costs. The law acknowledges this and provides for a situation where, rather than having each financier enforcing the security, a pool of financiers could appoint one of themselves as security trustee. This is based on the advantages that are recognized in the context of syndication of creditors, whereby the administration of the creditors’ interests by the sole security trustee who would hold the security on their behalf would expedite matters in relation to the debt administration, whilst facilitating the operation of the arrangement, which necessity would be rendered more impelling, the greater the number of creditors involved.