Securitization - Untapped opportunities

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Securitization

Untapped opportunities

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.

Key points

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

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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.

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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
How Deloitte can help you

Discover our Regulatory News Alerts

You can find the latest national, European or international regulatory updates analysed by Deloitte.

Get in Touch

Ekaterina Volotovskaya

Ekaterina Volotovskaya

Partner | Audit & Assurance

Ekaterina Volotovskaya joined Deloitte in March 2001 as senior in the audit department, where she currently serves as an audit partner for banks, securitization vechicles and private equity/ real esta... More

Michael JJ Martin

Michael JJ Martin

Partner | Forensic & AML, Restructuring

Michael is a partner within the advisory & consulting department and leads the forensic and restructuring practice. Michael has specialised in investigating and preventing money laundering and fraud. ... More

Sebastian Bos

Sebastian Bos

Senior Manager | Restructuring & Corporate Finance

Sebastian has 16 years of combined experience in Restructuring & Insolvency, M&A/Deal Advisory, Corporate Finance, Audit and Accounting. His industry experience and expertise includes securitisation, ... More

Alexandre Prost-Gargoz

Alexandre Prost-Gargoz

Partner | Corporate & Accounting

Alexandre is a partner within the tax department and has over 14 years of professional experience. Alexandre is specialised in accounting, tax and reporting solutions for private equity houses and man... More

Xavier Zaegel, FRM

Xavier Zaegel, FRM

Partner | Capital Markets/Financial Risk Leader

Xavier is a partner within the advisory and consulting department and is the head of the Capital Markets practice in Luxembourg. As a market and credit risk specialist, he has been leading various ass... More

Eric Collard

Eric Collard

Partner | Forensic & AML, Restructuring

Eric is a partner within the advisory & consulting department. He is specialized in providing advice to the financial sector in the areas of risk management and compliance issues. He also acted as ind... More