The
Law
of 22 March 2004 lays down the legal framework that
allows securitisation vehicles to be created. Securitisation
allows the transferor (company, firm or natural person)
to transfer to a Securitisation Vehicle those risks linked
to
debt
instruments, to
other
assets or to commitments undertaken by third parties
or fully or partly inherent in
business
activities, through the issue of stocks and bonds whose
value or yield depend on these risks.
These assets or risks
are represented by registered or bearer securities (shares,
bonds or certificates) representing the income or cash flow
that is generated.
Example
of an asset securitisation
 |
There are two types of securitisation
vehicles offered by the Luxembourg market to investors
and financial services
providers.
In the many examples
that follow, readers will be able to observe how the
law on securitisation will work as a competitive tool
thanks to its broad scope of application.
Securitisation of the
credit portfolio of a company is commonly given as an
example but the Law provides for many other areas, including
those connected to
private or family wealth planning.
Indeed the Securitisation
Law allows companies or individuals to withdraw some
assets from their wealth, placing them with a Luxembourg
securitisation vehicle, to avoid having to undertake
the risk of holding or managing these assets. Investors
thus finance the securitisation vehicle issuing the securities;
and in this way bear the risks in connection with the assets
held by that entity.
The Law includes all transactions by which a securitisation
vehicle acquires or assumes a risk linked to an asset. Financing
of transactions is achieved by issuing shares, bonds or
any other types of security (certificates, EMTNs or subordinated
loans).
By force of Law,
all the following assets may undergo securitisation: commercial
debt, mortgages,
current
accounts, shares,
debenture
loans whether subordinated or not, any financial
asset, any immovable
asset (including real estate or rights in rem) but also
all activities
with a certain and reasonable value as well as all activities
with a future income. Trackers
may be issued by a securitisation vehicle. The most diverse
business
risks may also be transferred to a securitisation vehicle.
