Pan-European structured financing trend expected in 2003

A pan-European, multi-jurisdictional approach to securitisations is set to become a key growth area in 2003, according to Fernando Bautista, a partner with international law firm Freshfields Bruckhaus Deringer. Bautista believes the traditional approach of treating companies as separate, national businesses is not advantageous where securitisation requirements can be packaged together to form larger transactions.

In 2002, Freshfields teamed with lead managers Credit Agricole Indosuez and Credit Suisse First Boston to structure two groundbreaking securitisations on behalf of automotive manufacturers Peugeot and Fiat. These deployed significant innovative structures.

Peugeot’s transaction involved the securitisation of €1.5 billion of auto loan receivables. These were originated by French and Spanish captive finance companies of the main Peugeot Citroen Group. The group’s French securitisation fund purchased the French receivables directly, while the Spanish receivables were purchased by a unique Spanish asset securitisation fund set up for the purpose.

Spanish authorities permitted a new kind of asset securitisation fund that issued a single, unrated and unlisted bond to a single subscriber. This bypassed traditional requirements for listing, rating and preparing of an introductory circular. French authorities accepted that ownership of ‘pass-through’ notes by a French securitisation fund constituted the acquisition of a receivable.

The innovative Spanish fund benefited from all legal privileges generally granted to ordinary asset securitisation funds. Once established, it issued a single, unrated bond to a Dutch special purpose vehicle, which in turn issued a pass-through note to a private French subscriber who sold the note to the French securitisation fund. This permitted the tax-efficient distribution of the income derived by the bondholder from the underlying receivables.

The French fund then issued asset-backed floating rate units that are listed on Euronext’s Paris SA and the Luxembourg stock exchange.

Fiat’s transaction was similar in structure. Spanish and French funds purchased the receivables directly and issued bonds that passed to an Irish Special Purpose Vehicle. It then launched floating rate notes presently listed on the Irish Stock Exchange.