Belgium is expected to market a 500 million ($596 million) delinquent tax receivables deal before year-end, joining a growing list of government securitizations that are expected to come to market before the end of the year.
Italy this week made a mandate announcement for its latest government related securitization deal - the sixth securitization from its INPS program of delinquent social security contributions similar to the planned Belgium deal. No size has been given to date but INPS has issued 16.9 billion of notes to date. Sized at 3.55 billion, INPS 5 priced last November. Italy also has a third SCIP transaction backed by property disposals and a deal backed by renewable energy charges lined up for the year.
The Belgian government is expected to move ahead with plans to securitize the state's uncollected tax debt. Market sources reported the new 500 million transaction to be part of the week's new deal pipeline. JPMorgan Securities will act as lead arranger. "The Belgian project is a trial in which difficult-to-collect tax credits are placed with institutional investors by the Belgian government via the capital markets," explained partners at the mandated Benelux law firm, NautaDutilh in a press release issued earlier this year. "In addition to taking over part of the outstanding tax debt and risking not being able to collect the outstanding tax, the end investor must be prepared to invest in the tax authority's efforts to collect the debt. The actual placement of the securities on the financial market will follow later this year."
Portugal initiated similar structure in 2003 to collect around 15% of its outstanding unpaid tax revenues under its Sagres series of deals (see ASR 5/23/04). One of the deals under the Sagres program hit a collection snag earlier this year, triggering a Fitch Ratings negative watch on all six classes under the Sagres 2004 deal structure. Analysts at Fitch said that they intended to have an update on the collections report by last week but that has been delayed. At the moment analysts said they are in the process of getting more background information.
So far indications are that collections are improving but remain below Fitch's base case scenario. Analysts said they are trying to understand what the scenario will be over the next 12 months. "These tax deals are somewhat specific in terms of jurisdiction - quite hard to structure and often have specific laws passed," said one market source.
On another front, Eurostat, the European Union's statistical office, is in the process of reviewing how government related securitizations should be booked, with market talk suggesting that the recent German postal pension deal will not qualify (see ASR 10/3/05) as off-balance-sheet financing. "More generally, Eurostat intends, as soon as possible, to clarify for all member states the rules on securitization operations in the ESA 95 Manual on government deficit and debt," said one market source. "This is due to the fact that problems of interpretation of existing rules have recently appeared, especially as regards [to] the provision of guarantees and the transfer of risk and benefits by government. Rulings may lead to a change in the data for some member states in the March 2006 notification."
Greece, which in the past has issued a number of government related securitizations, is directing its attention at private institutions. The market is getting underway with another two deals to follow up on the recent Karta Greek credit card securitization deal for EFG Eurobank. Egnatia Bank is working on the first Greek auto-loan transaction, expected to be sized somewhere between 350 million and 450 million. Additionally, Emporiki Bank has an 800 million Greek RMBS in the works. Both deals are expected to launch late this year or early 2006.
On the CMBS front, a GBP275 million ($487 million) deal from Citibank conduit Victoria Funding (EMC-III) began marketing last week. Victoria Funding is backed by seven loans on 19 properties, 84% of which are London office/retail spaces, 8.9% mixed, 1.5% office, 0.9% retail. Three loans had B pieces outside of the securitization and two loans rank alongside larger loan parts outside of the transaction. The E class notes are subject to an available funds cap.
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