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GLOSSARY

Appropriation definition

What does Appropriation mean?

Appropriation is a self-help enforcement remedy available to a secured party with security over financial collateral (ie cash, credit claims or financial instruments such as shares or other securities). It is available through the Financial Collateral Arrangements (No2) Regulations 2003, SI 2003/3226. It allows a secured party to take the financial collateral over which it has security as its own, or transfer it to a third party, as a means of enforcement without the need to take court action for foreclosure. It is common for security documentation over financial collateral to contain a clause granting a right of appropriation. The Loan Market Association's intercreditor agreement for leveraged acquisition finance transactions (the LMA intercreditor agreement) deals with the effects of appropriation on enforcement and the valuation of the financial collateral at appropriation. See clause 14 (Distressed Disposals and Appropriation) of the LMA intercreditor agreement.

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