2012 Arkansas Code
Title 23 - Public Utilities and Regulated Industries
Subtitle 1 - Public Utilities And Carriers
Chapter 18 - Light, Heat, And Power Utilities
Subchapter 9 - -- Arkansas Electric Utility Storm Recovery Securitization Act
§ 23-18-906 - Sale.

The sale, assignment, or transfer of storm recovery property is governed by this section. All of the following apply to a sale, assignment, or transfer under this section:

(1) The sale, conveyance, assignment, or other transfer of storm recovery property by an electric utility to an assignee that the parties have in the governing documentation expressly stated to be a sale or other absolute transfer is an absolute transfer and true sale of, and not a pledge of or security interest in, the transferor's right, title, and interest in, to and under the storm recovery property, other than for federal and state income tax purposes. For all purposes other than federal and state income tax purposes, the parties' characterization of a transaction as a sale of an interest in storm recovery property shall be conclusive that the transaction is a true sale and that ownership has passed to the party characterized as the purchaser, regardless of whether the purchaser has possession of any documents evidencing or pertaining to the interest. After such a transaction, the storm recovery property is not subject to any claims of the transferor or the transferor's creditors, other than creditors holding a prior security interest in the storm recovery property perfected under subdivision (4) of this section;

(2) The characterization of the sale, conveyance, assignment, or other transfer as a true sale or other absolute transfer under subdivision (1) of this section and the corresponding characterization of the assignee's property interest is not affected by:

(A) Commingling of amounts arising with respect to the storm recovery property with other amounts;

(B) The retention by the transferor of a partial or residual interest, including an equity interest or entitlement to any surplus, in the storm recovery property, whether direct or indirect, or whether subordinate or otherwise;

(C) Any recourse that the assignee may have against the transferor, except that any such recourse shall not be created, contingent upon, or otherwise occurring or resulting from the inability or failure of one (1) or more of the transferor's customers to timely pay all or a portion of the storm recovery charge;

(D) Any indemnifications, obligations, or repurchase rights made or provided by the transferor, except that such indemnity or repurchase rights shall not be based solely upon the inability or failure of a transferor's customers to timely pay all or a portion of the storm recovery charge;

(E) The transferor acting as the collector of the storm recovery charges or the existence of any contract that authorizes or requires the electric utility, to the extent that any interest in storm recovery property is sold or assigned, to contract with the assignee or any financing party that it will continue to operate its system to provide service to its customers, will collect amounts in respect of the storm recovery charges for the benefit and account of such assignee or financing party, and will account for and remit such amounts to or for the account of such assignee or financing party, including pursuant to a sequestration order authorized by this subchapter;

(F) The contrary or other treatment of the sale, conveyance, assignment, or other transfer for tax, financial reporting, or other purposes;

(G) The granting or providing to holders of the storm recovery bonds of a preferred right to the storm recovery property or credit enhancement by the electric utility or its affiliates with respect to the storm recovery bonds;

(H) The status of the assignee as a direct or indirect wholly owned subsidiary or other affiliate of the electric utility. The separate identity of any assignee of storm recovery property which is a subsidiary or affiliate of the electric utility shall not be disregarded due to the fact that the assignee and the electric utility share any one (1) or more incidents of control, including common managers, officers, directors, members, accounting or administrative systems, consolidated tax returns, or office space, that the assignee may be a disregarded entity for tax purposes, that the utility caused the formation of the assignee, that a contract by the utility and the assignee described in subdivision (2)(E) of this section exists, that the assignee has no other business other than pertaining to the storm recovery property, that the capitalization of the assignee is limited to amounts required for compliance with certain applicable federal income tax laws and revenue procedures, or that other factors used in applying a single business enterprise test to juridical persons are present;

(3) Any right that an electric utility has in the storm recovery property prior to its pledge, sale, or transfer or any other right of an electric utility created under this subchapter or created in the financing order and assignable under this section or assignable pursuant to a financing order shall be property in the form of a contract right. Transfer of an interest in storm recovery property to an assignee is enforceable only upon the later of the issuance of a financing order, the execution and delivery of transfer documents to the assignee in connection with the issuance of storm recovery bonds, and the receipt of value. An enforceable transfer of an interest in storm recovery property to an assignee other than a security interest shall be perfected against all third parties, including subsequent judicial or other lien creditors, when a notice of that transfer has been given by the filing of a financing statement in accordance with subdivision (4) of this section. The transfer shall be perfected against third parties as of the date of filing;

(4) Except as otherwise provided in this subchapter, financing statements required to be filed under this section shall be filed, indexed, and maintained in the same manner and in the same system of records maintained for the filing of financing statements under the Uniform Commercial Code -- Secured Transactions, § 4-9-101 et seq. The filing of such a financing statement with the Secretary of State shall be the only method of perfecting a sale, assignment, or transfer of storm recovery property. The sale, assignment, or transfer of an interest in storm recovery property perfected by filing a financing statement is effective against the customers owing payment of the storm recovery charges, creditors of the transferor, subsequent transferees, and all other third persons notwithstanding the absence of actual knowledge of or notice to the customers of the sale, assignment, or transfer. No continuation statement need be filed to maintain such perfection;

(5) The priority of the conflicting ownership interests of assignees in the same interest or rights in any storm recovery property is determined as follows:

(A) Conflicting perfected interests or rights of assignees rank according to priority in time of perfection;

(B) A perfected interest or right of an assignee has priority over a conflicting unperfected interest or right of an assignee; and

(C) A perfected interest or right of an assignee has priority over a person who becomes a lien creditor after the perfection of such assignee's interest or right; and

(6) The priority of a sale, assignment, or transfer perfected under this section is not impaired by any later modification of the financing order or storm recovery property or by the commingling of funds arising from storm recovery property with other funds. Any other security interest that may apply to those funds, other than a security interest perfected under § 23-18-907 shall be terminated when those funds are transferred to a segregated account for the assignee or a financing party. If storm recovery property has been transferred to an assignee or financing party, any proceeds of that property shall be held for and delivered to the assignee or financing party by any collector as a fiduciary.