If a lending company faces insolvency, bankruptcy, or similar adverse events, it may have a significant impact on their ability to fulfill their obligations, including servicing the issued loans and executing the early repayment obligation related to the assigned loan receivables. In such cases, the lending company may be unable to transfer the borrower's loan repayments or make payments for early repayment obligation, which could result in investors not receiving their expected payments.
To mitigate this risk, Nectaro on behalf of the issuer has the right to appoint a backup servicer who would take over the servicing of the loan receivables. However, Nectaro on behalf of the issuer also faces the challenge of proving to the administrator, receiver, or other parties that the loan receivables and the borrower payments should not be included in the lending company's assets available to the general pool of creditors.