The Maltese Parliament is considering a new securitization law generally based on the Luxembourg model. It provides a comprehensive framework for the conversion of receivables or other assets into securities that can be placed and traded in capital markets. Issued securities are collateralised by the pool of assets which are transferred to a separate entity, the securitization vehicle, also referred to as a special purpose vehicle (SPV). The SPV can take the form of an investment company, a partnership, a trust or any other legal structure permitted by the competent authority.
According to the bill there can be three forms of securitization: asset securitization, synthetic securitization (which does not involve a transfer of receivables by the originator to the securitization vehicle) and loan securitization, wherein the originator, as owner of income-producing assets, raises funds by issuing notes or bonds (secured by its assets) in the capital markets. Investors in an SPV would enjoy a first-ranking privilege over the securitized assets and their proceeds.
Securitization transactions will in principle not be regulated. However the constitutive documents of the SPV must provide that they are subject to the provisions of this law and the SPV must give notice to the competent authority that it intends to enter into one or more securitization transactions. A licence from the competent authority is required before the SPV can issue securities to the public.
The bill has the support of both sides of Parliament and is expected to come into force soon after the conclusion of the parliamentary process.
Dr Frank Chetcuti Dimech