On 16 February 2016 Law Decree no. 18 of 14.2.2016 (published on the Official Gazette on 15.2.2016, the “Decree”) came into force. The Decree provides for, inter alia, a State guaranty in connection with securitization transactions of non-performing loans ("NPLs"). Within 60 days the Decree shall be converted into law (which may also provide for further amendments), otherwise it will no longer be effective.

As mentioned in our 28 January 2016 report, the measure aims at facilitating the selling off of NPLs by Italian banks, as the State guaranty will cover the reimbursement of senior notes issued within securitization transactions, provided that they have obtained a rating equal to, or higher than the Investment Grade by an independent rating agency included in the list of rating agencies that are accepted by the ECB.

The State guaranties can be issued within a period of 18 months from the entry into force of the Decree, which can be extended for a further period of maximum 18 months.

Banks having their legal seat in Italy can apply for the issue of the State guarantee, by submitting a request to the Treasury Ministry (Ministero dell’Economia e delle Finanze “MEF”) together with the relevant documentation.

The enforcement of the guaranty can take place within 90 days from the expiry of the senior notes. In particular, if the SPV fails to repay the senior notes for at least 60 days from the relevant expiry date, the noteholder (through the noteholders ‘representative) shall send to the SPV a request for payment. After 30 days and within 6 months from the receipt of the request by the SPV, the noteholder can require repayment under the State guaranty, which shall take place within 30 days from the request. Following payment, MEF steps into the rights of the senior noteholders and therefore is entitled to recover the amount paid under the guaranty, plus interests and costs that have been incurred for the recovery.

Finally, in order to facilitate the recovery of NPLs, the Decree also provides for a reduction of the registration, cadastrial and mortgage tax payable in connection with the sale of the properties which are subject to enforcement proceedings to the fixed amount of Euro 200 each, provided that the buyer undertake to resell the property within two years.‎