Secured future

The Italian structured finance market has witnessed significant growth over the past two to three years, to the point where statistics now show that the Italian securitisation market is the second-largest in Europe after the UK, both in terms of volume and the number of securitisations. It represents approximately 17 per cent of the European securitisation market.
The total value of securitisation transactions in Italy increased from $4.53bn (£3.07bn) in 1998 to $27.7bn (£18.77bn) in 2001; and at the end of March 2002, the value of securitisation transactions already stood at $3.2bn (£2.17bn), which is not insignificant given the difficult market conditions at the beginning of the year.
One of the principal reasons for the growth in securitisations in Italy, in addition to general European market growth, was the introduction in April 1999 of the Law on Securitisation of Receivables (Law 30 April 1999, no 130) (Law 130).
Law 130 allows the incorporation of Italian special purpose vehicles (SPVs) specifically for the purpose of purchasing assets from an originator and simultaneously issuing asset-backed securities, which can be ring-fenced in favour of the holders of the asset-backed notes. Law 130 also removed the requirement for an Italian SPV to withhold tax on interest payments made by it to the noteholders and removed the restriction that prevented Italian companies from issuing securities in excess of their share capital. These changes, together with the view increasingly held by Italian banks that securitisations are useful balance sheet and regulatory management tools that enhance versatility on the asset and liability side and provide financial flexibility, have made the structuring, documentation and implementation of securitisation transactions in Italy much more efficient and have contributed to the increased market activity.
More than 100 securitisation transactions were completed in Italy in 2001 and many types of assets were securitised, ranging from consumer loans to public assets. One recent transaction of particular interest, completed in May this year, was the securitisation by Parma Football Club of its sponsorship, licensing and advertising agreements and television rights. The deal, arranged by AbaXBank, advised by Gianni Origoni Grippo & Partners, raised $88m (£59.64m) for the club.
The deal was the first football securitisation since Law 130 was passed, and it securitised what was in Parma's view a fairly predictable income stream. The deal differs from the football securitisations completed in the UK, which have been whole business securitisations of ticket receivables (for example, the securitisation of Ipswich Football Club's ticket receivables, which was completed in 2001). The Parma transaction also differs from the UK deals in that it is a short-term five-year deal, whereas the UK transactions have typically been for 25 years.
However, the fact remains that this is viewed as an innovative deal in Italy and has almost certainly set a precedent for future sports and other structured financings there. As a result, law firms that are located in Italy with both domestic and international capabilities believe themselves well placed to take advantage of the opportunities that are likely to arise, as they will be able to draw not only on local knowledge, but also on expertise available to them elsewhere in Europe and the US.
Another area where developments are expected is in the whole business securitisation market. To date, primarily because of legal structural issues which will hopefully be resolved by the end of 2002, this market remains dormant in Italy; but if it does develop, it may well also lead to increased activity from originators in the corporate sector, which have thus far played a less active role in the origination of securitisation transactions in Italy. The two busiest sectors have been the Italian treasury and the banking sector.
Finally, in line with the UK market, Italy also anticipates growth in the synthetic securitisation market as Italian banks increasingly turn to synthetics to obtain regulatory capital relief and to arbitrage credit risks. There have been few synthetic transactions in Italy, but one of the most active players has been Banca Intesa, which completed the first ever public synthetic securitisation of aircraft financing and aviation industry loans with Leonardo Synthetic Public Company. Banca Intesa, advised by Sidley Austin Brown & Wood, acted as servicer with Merrill Lynch International, advised by Freshfields Bruckhaus Deringer, acting as swap counterparty. The deal was viewed in Italy and elsewhere as a highly innovative transaction, again highlighting the potential for imaginative and original structured finance techniques to exist in Italy.
The growth of the Italian structured finance market looks set to continue. Law firms in Milan and Rome are expanding and strengthening their expertise through relocation of partners and assistants – for example, Ashurst Morris Crisp in Milan and Shearman & Sterling in Rome. The increased deal flow seen in the past three years, which has occurred as a result of both increased activity in structured finance markets generally and also because of the willingness of Italian legislators to implement changes such as Law 130, means that the Italian structured finance market is, without doubt, here to stay.
Siân Withey is a partner at Ashurst Morris Crisp