|Iñigo de Luisa||Jaime de la Torre|
Direct lending and alternative finance has become a booming phenomenon in Spain. Many non-banking platforms have been launched in the past two years to provide financing to Spanish small and medium-sized businesses (SMEs) in need of funds for new projects and growth capital, and to replace the liquidity lines provided traditionally by Spanish banks and saving banks in the past. After the wide restructuring of the Spanish banking sector, there is now a flourishing market for these players in Spain. The range of products offered includes factoring, pagarés (a special type of promissory note), secured and unsecured facilities and assignment of receivables. SMEs are now increasingly looking beyond the local banks to raise finance at quite inexpensive levels.
The enormous success of the alternative finance in Spain has brought a challenging dilemma for these new players in order to increase their activities: how to finance themselves. We have seen traditional bilateral loans granted to these platforms, but we have also participated in more complex securitisation structures by which the lending platform assigns its receivables and credit rights derived from its clients to a securitisation vehicle set up in Spain (normally an asset-backed securitisations fund) or abroad. This vehicle will issue bonds which are purchased by investors. Therefore, securitisation has proved to be an extremely efficient instrument for these non-banking platforms to obtain financing in a flexible way, as they can agglutinate the credit rights they owe before its clients and assign them periodically to the securitidation fund.
Spanish securitisation regulations have recently been amended. In April 2015, Act 5/2015 on promoting business financing (LFFE) came into force. This new regulation establishes measures to: (i) increase and facilitate SMEs' access to banking credit facilities; and (ii) create financing alternatives, such as direct corporate lending and non-bank financing.
The LFFE establishes important new measures regarding securitisation, adapting their legal framework to the new financial context, based on the experience accumulated from their application over the past two decades. The reform combines two previous legal securitisation categories – asset securitisation funds (FTA) and mortgage securitisation funds (FTH) and enables a more flexible framework and structure. It also strengthens transparency and investor protection requirements, defines the role of management companies, and modifies the supervision regime.
Although the new regulation no longer requires that assets assigned to the securitisation fund have to be uniform, from a legal and a financial perspective, it is complex to structure a transaction where transferred assets are not homogeneous. Size is also a critical factor, since normally a securitisation structure would require €30 million ($34 million) to be efficient.
In our opinion, although traditional bank financing is back in Spain, we believe that these non-banking platforms will be increasingly looking for alternative financing sources. Securitisation is undoubtedly becoming one of the most efficient tools available in Spain.
Iñigo de Luisa and Jaime de la Torre
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