Purchase Money Security Interest Refinancing in New Zealand: A Case for Retention of Super-Priority

Abstract

This paper concerns the issue of purchase money security interest (PMSI) refinancing. Under current law, PMSI super-priority is lost on refinance regardless of whether the refinancier is the original PMSI holder or a third-party financier. This paper contends that such a position is uncommercial, and frustrates the undergirding objective of the law of debt security to facilitate the provision of credit to business. This position is supported by theory, international treatment of the issue, and policy. Part I introduces the law in New Zealand. Part II explains the legislative purpose behind PMSI super-priority. Part III surveys the relevant comparative law in Australia, Canada and the United States. Part IV contends that a legislative amendment of ss 16 and 73-75 of the PPSA is the best method of recognising a refinancier’s legitimate right to super-priority.

Keywords: purchase money security interest, super-priority, debt security

JEL Classification: K00