Law Decree No 351 of September 25 2001, as converted with amendments into Law No 419 of November 23, on the privatization of real estate assets owned by the state and by other public entities, including local authorities and regions, contains a major change in Article 2 relating to the securitization of proceeds arising from the divestment of assets.
In particular, Article 2 says that the Ministry of the Economy and Finance, directly or through a third party, is authorized to incorporate or to promote the incorporation of certain limited liability companies. These companies, or vehicles, have an initial share capital of euro 10,000 ($8,880) and are set up with the sole aim of entering into one or more securitizations involving the proceeds arising from the divestment of assets. The incorporation of the relevant vehicle may also be made through a deed poll of the Ministry of the Economy and Finance. Securitization transactions may be structured through either the issue of securities or the entering into of loans by the vehicle. The principle of the segregation of portfolios introduced by Law No 130 of April 30 1999 will apply. No action will therefore be allowed against each separate portfolio by any creditor other than the noteholders or lenders in relation to the relevant securitization transaction.
Article 2 provides also that the notes issued or loans entered into as described above may be assisted in whole or in part by the guarantee of the Italian sovereign: such guarantee is to be provided in the decrees of the Ministry of the Economy and Finance incorporating the vehicles from time to time.
Further, vehicles incorporated under Article 2 are exempted from the registration requirements under Article 107 of the Banking Law approved by Legislative Decree No 385 of September 1 1993 differently from what is required for vehicles incorporated under Law No 130. Hence, vehicles will not be entered in the special register provided by Article 107 and consequently will not be subject to the supervision of the Bank of Italy.
Finally, special rules are set out concerning the tax regime of Article 2 transactions. Notes issued pursuant to Article 2 benefit from the same tax regime applicable to public securities issued abroad, to the extent that such notes are admitted to listing on at least one regulated foreign market or the notes are placed on foreign markets.
In conclusion, while it is clear that the new regime provided in respect of securitization transactions under Article 2 represents a true novelty, there are several issues that deserve further clarification. Firstly, since Article 2 expressly includes regions and other local authorities among the public entities whose assets may be used to structure securitization transactions, it would be appropriate for the legislator to specify the modalities which should be followed by regions and local authorities to use the Article 2 regime since no provision seems to be available in Law Decree No 351. Secondly, it would be useful to understand whether the newly implemented regime is deemed to represent a first step towards a more general reform of securitizations. There are in fact no reasons that would justify the exclusion of certain vehicles from the supervision of the Bank of Italy, creating a privileged regime for certain transactions only.