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11 June 2019
Securitisation of non-performing loans
Securitisation of real estate and registered moveable assets
Decree-Law 34 of 30 April 2019 (the so-called Growth Decree), which is effective as of 1 April 2019, introduced important amendments to the Italian securitisation framework. This article examines some of the new legislation's highlights.
Securitisation special purpose vehicles (SPVs) can now play a more active role in the context of non-performing or unlikely-to-pay exposures. The Growth Decree has further extended the possibility for SPVs to grant funding, in the context of economic and financial recovery plans, not only to the assigned debtors, but also to:
More importantly, the legislature has finally clarified the legal regime that applies to real estate companies that support the activity of securitisation SPVs in the context of the auction/repossession of mortgaged assets (so-called ReoCo).
It is now envisaged that more than one ReoCo can be set up in the context of the same transaction and that a ReoCo can assume, in full or in part, underlying indebtedness along with real estate assets. Further, all assets and sums originating from property and related assets are now ring-fenced and segregated from a ReoCo's other assets and liabilities. As a consequence, no enforcement actions may be promoted over the assets of a ReoCo by creditors other than the SPV purchasing the receivables and the noteholders of the asset-backed security notes issued by the same SPV.
The asset segregation at ReoCo level has key implications from a tax perspective. As long as there is a segregated pool of assets within a ReoCo, any revenues that it generates will not be subject to direct taxes.
The Growth Decree also introduced a more favourable tax regime regarding the transfer of assets to and by a ReoCo to eligible third parties.
The most revolutionary change that the Growth Decree has brought about is an entirely new breed of securitisation, where the issuer's obligations are backed by real estate properties (or registered moveable assets, such as a fleet of cars) and related cash flows, as opposed to a portfolio of monetary claims.
This new kind of securitisation envisages the issuance of notes by a special purpose entity owning the properties to be reimbursed through the rental income and disposal proceeds generated by the assets. Such assets and proceeds represent a segregated pool of assets and are shielded from enforcement actions, unless this is in the interest of the noteholders and other counterparties of the issuer under the transaction documents (eg, the hedging counterparties).
Arguably, this new type of transaction does not qualify as securitisation under EU Regulation 2017/2404 – regardless of the tranching of the notes – and are not subject to risk retention and the other requirements imposed by recent EU legislation.
Since the properties form a segregated pool, separate from the issuer's general assets and liabilities, the latter benefits from a tax neutral (and favourable) regime.
The Growth Decree will have to be converted into law within 60 days as of its entry into force and may be subject to amendments during that period.
The impact of the new provisions, however, may prove to be far-reaching since they can affect more traditional sectors and financial transactions, including project financing and real estate acquisition transactions, as well as shipping finance.
For further information on this topic please contact Vittorio Pozzi at Legance Avvocati Associati by telephone (+39 02 89 63 071) or email (email@example.com). The Legance Avvocati Associati website can be accessed at www.legance.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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