The discreet charm of the common-law trustee

Any capital-markets issue that is collateralized will tend to have an independent third-party trustee as holder of the security. This is a simple structure that originated in the common law (the Anglo-Saxon systems found in the UK, the former British Commonwealth and the US) and has been harnessed elsewhere, such as Scandinavia and the Middle East (see last month's Financial Lawyer). But, hitherto, unsecured plain-vanilla issues have tended to be done without inserting a trustee structure, but with a fiscal agent instead. This has the merit of economy, since the fiscal agent tends to be the principal paying agent and the combined cost forms part of the pricing package put to the issuer. However, the benefits of using a trustee are being increasingly recognized, not least because of its legal standing within the issue structure.

Unlike a fiscal agent, which is the issuer's agent and has no contractual duty to...