The European Commission, the European Central Bank and the Bank of England have taken a positive view and aim to restart the securitization market in the European Union. Deloitte can help you with the structuring, implementation and day-to-day administration of securitizations in Luxembourg.
Securitization has proved to be a refinancing and restructuring vehicle of choice in recent years. Deloitte can help you on the road ahead.
The law of 22 March 2004 (“The Law”) lays the foundations for the securitization vehicles in Luxembourg1. With a comprehensive and flexible legal, regulatory and fiscal framework, the Law encourages securitization business in Luxembourg and purports to facilitate capital market transactions and/or intra-group transactions as well as combination of both.
Securitization may also present untapped opportunities for banks and asset managers in search of a new business model. Securitization can be used by banks and asset managers to widen their product offerings to pension funds, insurance companies, sovereign wealth funds, other professional investors and High-Net-Worth individuals ("HNWIs"). In addition, securitization may provide solutions for sub or non-performing private equity and illiquid hedge funds investments, infrastructure, real-estate and shipping-related loans as well as foster a new financing and refinancing model for small and medium-sized enterprises ("SMEs").
1 On 23 October 2013, the Luxembourg supervisory authority ("CSSF") issued Frequently Asked Questions ("FAQs") on securitization
What else makes securitization in Luxembourg attractive to investors?
In order to create appropriate segregation of assets and liabilities, a Luxembourg securitization vehicle can create one or more compartments corresponding to a distinct part of the securitization vehicle’s assets. Each compartment may issue notes against a single asset/claim or a portfolio of assets/claims. These segregated compartments do not contaminate each other in case of under or non-performance of the assets. The rights of recourse of the investors and creditors are limited to the assets of the relevant compartment (subject to terms and conditions of the offering documents).
The Law confirms the bankruptcy remoteness mechanisms (limited recourse and non-petition clauses) to separate the securitized assets from insolvency risks. Luxembourg securitization vehicles can be utilized in the context of strategic organizations of financing and refinancing activities without untying long-standing relationships between banks and borrowers. Securitization can also be used by institutional investors to gain exposure against specific asset classes in which they are prohibited to invest directly.
Luxemburg securitization companies2 are generally not subject to supervision by the Commission de Surveillance du Secteur Financier (CSSF) and principally do not fall with the scope of the Alternative Investment Fund Manager Directive (AIFMD). However, securitization transactions can also be structured in such a way that securitization companies become subject to the supervision by the CSSF and also fall within the scope of AIFMD, which can have a positive impact on the distribution and placement of the issued notes.
2- Luxembourg securitization funds are always subject to approval and supervision by the CSSF.
How Deloitte can help you
Deloitte is proud to offer a centralized securitization team and state of the art technology to assist with the initial structuring and regulatory, tax and accounting set-up as well as the daily administration of securitization structures, their investment portfolios and issued financial instruments.
- Pre-securitization assistance
- Securitization implementation assistance
- Post securitization assistance