Securitization law paves way for further financing deals

LONDON – Fitch Ratings, the international rating agency, said yesterday the Greek Parliament’s passing of the much anticipated private sector securitization law, due to be published in the official Government Gazette shortly, paves the way for rapid growth in securitization in Greece. Its full statement follows: «There have already been five public placements of government sector securitization transactions, since the public sector-specific law was enacted in 2000, but to date none from the private sector. «Fitch has been an active participant in the development of securitization in Greece. The agency organized the first seminar on Greek securitizations held in Athens in 2001; it also provided input during the drafting process of this new law, and more recently by presenting on the topic of securitizations and ratings in a seminar organized by the Greek Association of Corporate Management (EEDE). «The new private sector securitization law, which will come into effect upon publication in the gazette, was passed by Parliament along with legislation for corporate bonds. The latter introduces the concept of a bond trustee. «The provisions of the law dealing with securitization covers real estate as well as non-real estate assets, consumer and commercial ‘receivables’ alike, existing as well as future receivables. The law establishes the concept of a Greek special purpose vehicle (SPV) and with the exception of real estate transactions, also allows the use of foreign SPVs as issuers of notes. Third-party credit enhancement is allowed as well as the use of derivative instruments. «It also establishes the security interest in favor of the note holders over the transferred assets, which is perfected via registration of the receivables purchase agreement and notification to the underlying obligers. However, this notification can equally be effected via registration in the Public Registry Book. These transferred assets are protected against creditor claims upon the transferor’s bankruptcy. In the case of real estate securitizations, full ownership or the usufruct (the right of enjoyment of a property owned by a third party) on assets may be transferred and the security perfected via notification to tenants. «According to the new law, transfer of additional receivables is allowed as long as the rating is not affected. The law requires that collections are immediately deposited with an account bank and establishes the concept of segregation of funds from the assets of the servicer and/or account bank, and thus immunity from the bankruptcy of the servicer. The law precludes the existing banking secrecy law from impeding the transfer of assets. Additionally, the law makes certain provisions with respect to securitization transactions for exemption from direct or indirect taxes, stamp duty, etc. «Servicing may be carried out by the originator/transferor of receivables, to a financial or credit institution operating in the European economic area, to a guarantor of the receivables, or to a prior servicer of the receivables. «Notably, the law currently limits placement of securitizations to a private basis with up to 150 investors. Greek mutual funds and portfolio investment companies can invest in Greek securitizations as long as the securitizations are rated investment grade by a nationally recognized rating agency, such as Fitch Ratings. Greek insurance companies and pension funds are precluded from investing. However, there are no restrictions for foreign investors. «Fitch’s long-term sovereign rating of Greece is ‘A.’ However, this does not act as a ceiling for Greek private sector securitizations which can attain ‘AAA’ on their merits, just as for other sub-‘AAA’ countries in the eurozone, such as Italy and Portugal.» The last three public sector securitization transactions are Atlas Securitization SA, the 2-billion-euro securitization backed by payments under the Third Community Support Framework; Aeolos SA, which securitized charges on airlines for their use of Greek air space; and very recently, the New Economy Development Fund (TANEO), a securitization of a private equity fund-of-funds set up by the Economy Ministry to help start-ups in the information technology sector.