UCC FINANCING STATEMENTS: LIMITS OF COLLATERAL DESCRIPTIONS
On 29 May 2026, the United States Bankruptcy Court for the Southern District of Texas issued a summary judgment order in Evolution Credit Opportunity Master Fund II-B v. First Brands Group.
The court held that Evolution did not hold a perfected security interest in tens of millions worth of non-purchased receivables of certain subsidiaries of First Brands (the receivables sellers).
The decision turned on a bedrock principle of article 9 of the Uniform Commercial Code (UCC): a financing statement must, on its face, indicate the collateral claimed and third parties should not be required to obtain and parse confidential underlying agreements to determine the scope of a secured party’s collateral.
While the result may seem straightforward to outside observers, the order is best understood in the broader landscape of case law addressing sufficiency of collateral descriptions in financing statements – a landscape in which fact-specific outcomes depend largely on the language chosen by the filer.
Insufficient collateral descriptions can not only lead to expensive litigation, but they can also potentially produce severe consequences for secured lenders who may find themselves with less collateral than anticipated in distressed situations and bankruptcy proceedings.
The First Brands decision
Evolution purchased accounts receivable from the receivables sellers pursuant to a master receivables purchase agreement (MRPA). The MRPA separately granted Evolution a broader security interest in all of the receivables sellers’ accounts receivable – including those not sold and purchased – as collateral for the receivables sellers’ obligations.
Oct-Dec 2026 issue
King & Spalding LLP