Secured Transactions: The Transfer of Security Interests

Much has been written about the attachment and perfection of security interests. Less attention has been paid to how those liens, once perfected, can be transferred to other creditors. Transfers of security interests can occur, for example, in connection with the transfer of debt secured by liens or with the substitution of a secured party. (Note, a substitution of secured parties may occur, for example, when one collateral agent is succeeded by another. U.C.C. ' 9-207(c)(3) also permits secured parties to repledge collateral separate from the debt, but discussion of such procedures is beyond the scope of this article.) Ease of transferability of perfected security interests is critical to ensuring access to capital in financing transactions, especially in securitizations. The assignee of a security interest wants to succeed to both the assignor's perfected lien and the priority of that lien. (Note, technically, the rules discussed herein apply with respect to assignments by the assignor's predecessors in interest, in the case of multiple assignments. For the sake of clarity, however, we refer only to the immediate assignor, not its predecessors in interest.) Failure of an assignment to achieve either of these goals could result in a forfeiture to junior secured parties or the debtor's bankruptcy estate.