Italian Law Decree no. 18 of 14 February 2016, published in the Official Gazette on 15 February 2016 (the “Decree”) provides for urgent measures, already in force, related to, inter alia, the Italian State guaranty scheme (so called “GACS”) for the senior tranches issued in the course of securitization transactions of NPLs, or to the tax regime for the purchase of properties in the course of enforcement procedures.
The Italian Ministry of Economics and Financial affairs (“MEF”) is authorized to grant the GACS for a period of 18monthsstarting from the entry in force of the Decree, meaning 16 February 2016, which can be extended for further 18 months, subject to the European Commission approval.
GACS are of unconditional, irrevocable and first-demand nature, may guarantee only the senior tranches issued within securitisation transactions related to NPLs which are sold by “Italian banks having legal seat in Italy”. According to the literal wording of the Decree, Italian-based branches of foreign banks should not benefit of the guaranty.
The guaranty is of onerous nature, based on an annual remuneration calculated at “market conditions”, as provided for by the Decree (Art. 9, para. 3), on the basis of a peculiar method linked to three CDS baskets.
Securitisation transactions comprised in the guaranty scheme shall comply with specific features specified in the Decree, such as:
- the credits to be assigned are transferred to an SPV for a price which does not exceed their net value as showed in the balance sheet;
- the notes issued in the securitisation transaction are of at least two different classes, linked to the ranking in the participation to losses;
- the “junior” notes, meaning those which are more subordinated, will not get repayment of principal and interest until full reimbursement of the notes of higher ranking;
- it is possible to issue one or more tranches of “mezzanine” notes, which are subordinated to senior notes in terms of repayment of interest and are paid in priority to said senior notes in terms of repayment of the principal.
In order to benefit of the guaranty, the senior notes must have obtained by an external rating agency endorsed by ECB as of 1 January 2016, a rating no lower than Investment Grade.
The guaranty is issued through decree of the MEF following to the application filed by the selling bank and comes into force when the selling bank has transferred for consideration at least 50% plus one of the junior notes and, in any case, an amount of junior notes (and, if any, of the mezzanine notes) which entitles the selling bank to write off the relevant credits also on a consolidated group basis according to the relevant accounting principles.
The GACS is enforceable within nine months from the expiry of the senior notes. Specifically, if guaranteed notes remain unpaid – even partially, for principal or interest – for more than six months following their maturity date, the noteholders (jointly and through the noteholders’ common representative) will send a request of payment to the SPV. Following 30 days from the request and within six months from its receipt by the SPV, the noteholders may request payment under the e GACS.
Within 30 days from the request, the MEF (which following to payment subrogates the senior noteholders in their rights vis-à-vis the SPV) shall pay to the noteholders the sums due on the agreed dates and for the amounts originally provided for by the securitisation transaction, without increase in costs or expenses.
In order to cope with the economic commitment required by the State guaranty scheme, a fund has been created at the MEF for an amount of 100 million euros for year 2016, to be from time to time increased by the annual remunerations of the guaranties.
In order to enhance the sale of NPLs by the banks by incentivizing the realization of the secured assets, the Decree also introduces important amendments to the fiscal regime related to transfer of properties within enforcement sales.
In particular, art. 16 of the Decree reduces each of the registration, mortgage and cadastral tax applicable for transfers of properties or other rights in rem ordered in the course of judicial enforcement procedures or a bankruptcy procedures to a fixed tax equal to 200 Euro (in lieu of the ordinary tax calculated on a proportional basis), provided that the purchaser will then re-sell the properties within the following two years. If that is not the case, “ordinary” taxes will be due in full plus a 30% sanction, and default interest. Such provisions apply to all transfers completed between the date of entry in force of the Decree and 31 December 2016.