New changes to Italian securitisation law to facilitate synthetic securitisations

On 29th February 2020, Law No. 8/2020 which converts into law Italian Law Decree No. 162/2019 (Law Decree 162) was published in the Italian Official Gazette (Gazzetta Ufficiale) so introducing some changes to Italian Law 130/1999 (Italian Securitisation Law). Among the changes introduced by Law Decree 162 we would like to highlight some new provisions mainly aimed at enabling the use of Italian Securitisation Law to structure synthetic securitisations.

1. Background

Through the enactment of Law No. 145/2018 in December 2018, certain provisions were introduced amending the Italian Securitisation Law. Among the various changes, there were some provisions specifically designed for the implementation of synthetic securitisations through Italian securitisation vehicles. More precisely according to such new provisions, an Italian SPV is entitled to carry out a securitisation of receivables where - instead of an outright sale of receivables from the assignor to the SPV - the latter would make a financing to the borrower and, if certain conditions are met, such financing might allow the borrower (i.e. the originator) to transfer to the lender (i.e. the SPV) the risk of the securitised receivables. According to such provisions introduced at the end of 2018, the transfer of the risk to the SPV (without transfer of ownership) was coupled with a concept of full allocation or even segregation of the securitised receivables and related securities in favour of the SPV lender
Law No. 145/2018 laid down  inter alia a timeline within which the Italian Ministry of Economy and Finance was required  to introduce certain delegated decrees to provide guidance on certain aspects concerning the segregation of assets for such newly introduced scheme.
In particular such decrees had to govern and define further aspects concerning:

1. the kind of assets and rights to be segregated for the benefit of the noteholders (or the derivatives’ counterparties in the context of hedging agreements); and
2. the applicable schemes in order to segregate those assets and rights jointly with clarification on their enforceability.

 

2. New provisions under Law Decree 162

First of all, Law Decree 162 extends the timeline originally set by Law 145/2018 for the issuance of the decrees of enactment to 31 December 2020.
In addition, Law Decree 162, without amending any provisions of the Italian Securitisation Law, provides for certain clarifications concerning the segregation of assets and rights in order to facilitate synthetic securitisations. In particular it has been clarified that:

• article 4 of the Italian Securitisation Law (which inter alia lays down simplified forms of notification to the assigned debtors also entailing transfer of the related security rights to the SPV) applies to the securitisations performed through finance granted by the SPV to the borrower, rather than an outright sale of receivables from the assignor to the SPV;
• for the purposes of the segregation of assets and rights, the borrower must adopt a corporate resolution, which shall be published, pursuant to article 2436 of the Italian Civil Code, in the competent Company Register. Said resolution must specify:

1. the assets and rights to be segregated (which can be also selected en bloc and not by list),
2. the entities which benefit of the segregation and their rights in relation to  the segregated assets and rights;
3. the envisaged manner of  disposal or replacement of the segregated assets and rights; and
4. the limits within which the borrower can use the cash flow generated by the disposal or replacement of the segregated assets and rights;

• in case of insolvency proceedings (procedura concorsuale o di gestione della crisi) regarding the borrower, the segregation of assets and rights shall remain in full force and effect and the agreements part of the segregated assets cannot be terminated on grounds  of the insolvency proceedings (procedura concorsuale o di gestione della crisi) overwhelming the borrower, however the competent bodies of the insolvency proceeding are entitled to transfer assets, rights and liabilities of such segregated estate to the SPV or to another entity designated by the SPV.

 

3. Conclusion

Once all decrees of implementation have been enacted (i.e. by end of 2020) we will have a more complete picture, even so,  the recent changes introduced with Decree 162 have already provided a large part of the guidance that investors and originators were expecting following the introduction of this scheme at the end of 2018. It will be interesting to see how banks and other originators make use of such new provisions for capital relief purposes and whether market participants will actually  consider  such a scheme as a more efficient alternative to traditional securitisations whereby assets are transferred to the SPV.
 
Avv. Carmelo Raimondo
Avv. Matteo Colavolpe