Securitisation - Reconnecting with Real Economy. The legal tools

Transcription

1 Securitisation - Reconnecting with Real Economy The legal tools 20 th Edition of the Paris EUROPLACE International Financial Forum in Paris, July 10 & 11, 2013 HERVE TOURAINE, 10 July 2013 Freshfields Bruckhaus Deringer LLP

2 Introduction 1. Which legal tool can meet the challenge / create opportunities in the financing of the real economy? Is a securitisation vehicle suitable for this purpose? Yes, the French securitisation vehicle known as fonds commun de titrisation or FCT 1. Is extremely efficient at today s date Presentation of a limited number of legal features supporting its flexibility, attractiveness and robustness Particularly helpful for the setting-up of FCT dedicated to the financing of the real economy Will be even more relevant as from tomorrow Presentation of the current discussions and potential improvements supported by Paris Europlace, aiming at improving the ability of the FCT to finance the real economy 1

3 Main existing legal features The FCT operates in a regulated and transparent environment Not a regulated entity as such But created by a Management Company and a Custodian which are regulated The Management Company is the legal representative of the FCT and its day-to-day manager. It is a regulated entity licensed by the Autorité des Marchés Financiers (AMF) as a portfolio management company (société de gestion de portefeuille) The Custodian is in charge of the custody of the assets of the FCT. It is a credit institution established in the European Economic Area and therefore regulated by a competent supervisory banking authority Fully transparency The FCT is established by way of a règlement entered into by the Management Company and the Custodian and which discloses in all details the assets and liabilities of the FCT and all costs and remunerations. It constitutes contractual obligations of the Management Company and the Custodian towards the investors and it is enforceable against them 2

4 Main existing legal features The FCT is extremely flexible and efficient Creation No legal personality, share capital, board, shareholders or registration: it is a pure contractual animal Asset side Large variety of assets (excluding equity securities and tangible assets): loans, receivables, debt securities, financial instruments, insurance risks, in each case governed by any laws Very simplified assignment mechanism, entailing automatic transfer of the full security package with no formalities and associated costs Liability side All types of debt transferable securities: short/medium/long term, CP, EMTS, notes, bonds, rated/unrated, listed/unlisted, junior/mezzanine/subordinated, together with all types of financial instruments, derivatives and financing sources, in each case governed by any laws 3

5 Main existing legal features The FCT is extremely secured and robust Asset side True sale, irrespective of the governing law of the receivable, the nationality / location of the debtor and the bankruptcy of the originator Full protection of the collections thanks to a specific dedicated account ( compte spécialement affecté ), even in case of bankruptcy of the servicer Liability side Enforcement of subordination and limited recourse clauses, including order of priorities of payments and flip clauses Additional legal features Benefit from the financial collateral directive regime (close out netting and avoidance of systemic risk) Compartment segregation Last but not least: by law, the FCT cannot be bankrupt 4

6 A powerful financing tool for the real economy Legal features helping financing the real economy Ability to acquire all sort of loan receivables: simple loans (corporate / local / public authorities) but also more structured loans (real estate / infrastructure) Automatic transfer of complex security package (real estate and infrastructure) Ability to issue bonds mirroring the acquired assets (principal, interest and timing), ensuring transparency between the loans and the bonds Ability to issue partially paid bonds in order to meet the investment needs when necessary and upon demand from the Management Company Suitable real economy segments Corporate, local authorities, public entities, real estate and infrastructure Suitable transactions and market players Loan refinancing, originate to distribute, debt funds and project bonds SMEs and non listed/rated corporate, local authorities and public entities, financial institutions, investment managers and insurance companies 5

7 Further improvements Under process / imminent / very likely Further improvement of the so-called ( compte spécialement affecté ): protection extended in case of bankruptcy of the account bank No need for a third party servicer: convenient for syndicated loans No absolute need for a rating of the bonds issued when they are listed Significant extension of the base of investors through the creation of fonds de prêts à l économie benefiting from a favourable solvency treatment when subscribed by insurance companies. Expected main features are: asset side: limited to loans to, or debt instruments issued by, non financial corporate, local authorities and public entities, with a minimum maturity of two years and which must be acquired within three years from the setting up of the FCT/compartment liability side: limited to denominated bonds without tranching and interest / currency swaps if necessary for hedging purposes specific reporting: annual assessment of risks on a loan by loan basis and quarterly independent valuation of the bonds issued 6

8 Further improvements Potential / likely / wish list Long list. Specific features to ease the development of the newly created fonds de prêts à l économie : asset side: ability to acquire unfunded commitments liability side: ability to implement subscription facilities 7

9 PAR Ces informations sont données à titre indicatif et ne sauraient tenir lieu d avis juridique. Freshfields Bruckhaus Deringer LLP