Amendments to the Securitisation Law Introduced by the Decreto Crescita

Italiano: Le modifiche alla legge sulla cartolarizzazione introdotte dal Decreto Crescita

Law No. 130 of April 30, 1999 on securitisation ("Law 130") has been amended by Law Decree No. 34 of 30 April 2019 on urgent measures for economic growth, published in the Official Gazette No. 100 on 30 April 2019 and in force since 1 May 2019 (the "Decreto Crescita"). The main changes include:

1. in the event of securitisations of receivables arising from credit facilities classified as unlikely to pay (“UTP”), the opportunity for transferring the undertakings or the option for issuing to a bank or financial intermediary separately from the account to which the credit facility is linked;
2. the broadening of the type of entities to which securitisation companies may grant loans pursuant to Article 7.1, paragraph 3 of Law 130;    
3. the opportunity for setting up supporting special purpose vehicles (“Supporting SPVs”) for acquiring, managing and valuing real estate or registered movable property, and for applying Article 58 of the Consolidated Banking Act (“TUB”) to the transfers of such registered real estate or movable property to Supporting SPVs even in the absence of legal relationships that may be pooled (i.e. identifiable in blocco);
4. the opportunity for Supporting SPVs that purchase leased assets together with their underlying agreements to be consolidated within the balance sheet of a financial intermediary pursuant to Article 106 of the TUB, and not solely within those of a bank;   
5. the possibility to carry out real estate and registered movable property securitisations;
6. changes to the tax treatment of Supporting SPVs and to the effect of transfers of assets to and from those Supporting SPVs.

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Prior to the Decreto Crescita, Law 130 was amended and supplemented, inter alia, as follows:

• Law No. 96/2017 introduced specific rules for the securitisation of non-performing loans, and provided for the possibility of setting up an ad hoc Supporting SPV for the purpose of acquiring, managing and valuing (in the interest of the securitisation transaction) real estate assets as security for the loans subject to the securitisation, including assets subject to financial lease agreements;
• Law 145/2018 introduced specific provisions relating to (a) the issuance of bonds; (b) loans granted by an issuer special purpose vehicle (“Issuer SPV”); (c) synthetic securitisations and (d) securitisations of income streams arising from the ownership of real estate assets.

It should be noted that the Decreto Crescita has not yet been converted into law and, as such, it is still subject to change.

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1.     SECURITISATION OF RECEIVABLES ARISING FROM CREDIT FACILITIES

The following amendments aim to facilitate the assignment of UTP receivables arising from credit facilities, by avoiding the need to terminate the original agreements through the assignment of the disbursement undertakings to a bank or financial intermediary, and the maintenance of the original account with the transferor bank. 

In the event of assignment of receivables arising from credit facilities, should the receivables be classified as non-performing:

• the assignor bank may (pursuant to Article 58 of the TUB) assign the undertakings or disbursement options arising from the relevant credit facility agreement or credit facility agreement to a bank or financial intermediary separately from the account to which the credit facility is linked;
• the assignor bank retains the credit facility account;
• collections remain linked to the original credit facility even if they arise following the assignment;
• collections proceeds are segregated from both the assets of the assignor bank and from those relating to other transactions; and
• no creditors other than the noteholders, the bank or the financial intermediary ma pursue legal claims over such segregated assets.

2.     THE GRANTING OF LOANS BY SECURITISATION COMPANIES

Pursuant to Article 7.1, paragraph 3 of Law 130, financing aimed at improving collections and assisting debtors with remedying existing defaults may be granted by the Issuer SPV to:

• persons who assume the liabilities of assigned debtors; and
• debtors’ connected parties pursuant to article 2359 of the Italian Civil Code (e.g. company groups).

3.     THE ASSIGNMENT OF ASSETS AND RIGHTS TO SUPPORTING SPVs

The further amendments introduced by the Decreto Crescita focus on the provisions of Article 7.1 of Law 130 which, as mentioned above, was introduced in 2017 in order to lay down specific rules for the securitisation of non-performing loans.

In particular, with reference to the so-called Reoco or Leaseco and the assignment to them of real estate, registered movable property or other assets and rights granted or pledged as security for the loans subject to securitisation, it is envisaged that:

• one or more Supporting SPVs may be set up for the purpose of acquiring, managing and adding value (in the exclusive interest of the securitisation transaction), directly or through further Supporting SPVs authorised to take over, in whole or in part, the original debt, any real estate and registered movable properties, and other assets and rights granted or created (whatever the form) as security for the underlying (securitised) loans;
• the assignment of the above-mentioned assets and rights may take place pursuant to article 58 of the TUB, even where such assignment is not of assets or legal relationships that may be pooled (identifiable in blocco). This provision is also extended to the assignment of financial leasing assets, together with the agreements or legal relationships arising from their termination;
• any amounts arising from the holding, management or disposal of the assets and rights assigned to the Supporting SPVs belong to the Issuer SPV (thus clarifying that the Supporting SPV’s role is one of support for the Issuer SPV in the context of the securitisation transaction); and     
• the assets, rights and monies arising from the assets managed by Supporting SPVs in the context of the securitisation are segregated from those of the Supporting SPVs’, so legal actions over such assets may only be pursued by Issuer SPVs in the interest of the noteholders.

4.     THE ASSIGNMENT OF ASSETS AND FINANCIAL LEASING AGREEMENTS TO SUPPORTING SPVs

In the event of assignments of leased assets together with the related agreements or the legal relationships arising from their termination, Supporting SPVs’ financial figures may be consolidated within the balance sheet of a financial intermediary and not solely within that of a bank.

5.     SECURITISATIONS OF REAL ESTATE AND REGISTERED MOVABLE PROPERTY

The Decreto Crescita introduces a new Article 7.2 relating to the securitisation of real estate and registered movable property assets, as well as real and personal rights with underlying real estate and registered movable property assets.

Article 7, paragraph 1, b-bis of Law 130, as amended by Law 145/2018, already provided that its provisions are applicable to securitisation transactions of proceeds arising from the ownership of real estate, registered movable property and related real or personal rights.

With its new article 7.2, Law 130 specifies that:

• securitisation companies that carry out any of the transactions referred to within paragraph 1 b-bis of Article 7 may not carry out securitisation transactions with underlying assets that are different from those subject to such transactions;
• as a preventative measure, the assets and rights intended to satisfy the rights of the noteholders and the counterparties to ancillary agreements should be identified for each securitisation transaction; and
• any assets and rights, the amounts in any way arising from the same assets and any other right acquired by an issuer in the context of a securitisation transaction are segregated, and legal actions over any such assets are permitted solely on the part of the noteholders.

6.     THE TAX TREATMENT

Particularly significant tax changes have affected Supporting SPVs (also known as Reoco and Leaseco) as well as the transactions carried out by them. For a more detailed explanation on these tax changes, please refer to the Orrick’s Tax Department’s Alert (by Giovanni Leoni, Of Counsel, and Camillo Melotti Caccia, Senior Associate) available at the following link: The new tax regime for Supporting Vehicle Companies in the context of securitization transactions.