FAA Security Agreement for Destroyed Engine

Question:

We currently have an FAA Security Agreement for the plane and the engine, however, the engine listed was destroyed. A new engine needs to be added. Does a new Security agreement need to be prepared or an amendment to the original?

Answer:

I prefer to do a new security agreement because it is cleaner, but your state's laws and the verbiage of the current security agreement will also impact how to proceed in this area. This change in collateral may also impact other related loan documents such as a loan agreement and possibly even the note depending on the verbiage in each document. I recommend you contact an attorney in your state that can review the documents and advise you on the exact changes that are necessary to ensure that the bank's collateral interest remains protected.

First published on BankersOnline.com 7/1/13