On February 14, 2016, the Italian Government approved the law decree ("decreto-legge" or the "Decree") that regulates, inter alia, the release of a guarantee by the Italian Government for non-performing loan ("NPL") transactions.
As confirmed by the EU Commission, the guarantee released by the Italian Government would not constitute a state aid, subject to the terms set out by the EU Commission.
Summary of the Decree
According to the Decree, the guarantee of the Italian Government (the "Guarantee") can be released in the context of securitization transactions having the following features:
The NPL portfolio is sold to an Italian securitization vehicle ("SPV") that issues asset-backed securities/notes pursuant to the Italian securitization law (i.e., Italian law no. 130 of April 30, 1999). The seller of the NPL portfolio is a bank having its registered office in Italy. The portfolio comprises monetary receivables (including monetary receivables deriving from leasing agreements) that are classified as non-performing claims ("sofferenze"). The non-performing receivables are sold to the SPV for an amount that is not higher than their net book value ("valore netto di bilancio"). The SPV issues at least two different classes of notes having a different ranking ("Notes"). The most junior class of Notes will not receive any payment as principal, interest, or other form of remuneration until the full repayment of the principal of the other classes of Notes. The SPV can issue one or more classes of mezzanine Notes that, for the payment of interest thereon, (i) rank junior to the payment of interest on the senior Notes and (ii) rank senior to the payment of principal on the senior Notes; The SPV may enter into hedging agreements for the exposure toward the interest rate risk. The SPV may also enter into liquidity facility arrangements to cover potential shortfalls in the cash flows of the transaction that are consistent with the credit rating assigned to the Notes. The Guarantee is released only in respect of the senior tranche of the Notes issued by the SPV. The senior Notes that are the object of the Guarantee have been previously assigned with an investment grade rating by one of the recognized rating agencies (i.e., external credit assessment institutions or "ECAI"). The credit rating for the Senior Notes can also be issued in form of a private rating addressed exclusively to the Italian Ministry of Economics and Finance (in such case, the relevant ECAI proposed by the selling bank will be approved by the Italian Ministry of Economics...