Italy is very much the hot area for securitization in Europe, according to statistics released recently by Merrill Lynch's ABS research team. The news come as no real surprise following the introduction of a specific securitization law last April (ASRI 5/3/1999 p.1).
So far this year, Italy has seen 16 deals for a total volume of $6.132 billion, compared to just eight deals in the whole of 1999 for a total of $7.733 billion (a total that includes INPS E4.65 billion jumbo) With four months of the year remaining, and with more deals in the pipeline, the total issuance is well on course to exceed last year's figure.
At present, much of the activity has been limited to deals backed by non-performing loans and CDOs, but as the market develops Merrill expects more diversity in asset classes, encompassing trade receivables, auto loans, film rights, leases and performing mortgages.
As others have said before, Merrill still believes that there are a few things that need to be ironed out in the securitization law. Concerns include uncertainty over the bankruptcy remoteness of the issuer and a withholding tax on any interest accrued in case of redemption of notes within the first eighteen months of deal launch.
In practice, the bankruptcy remote issue has not been a factor as banks have increased their focus on tightening structures and documentation. As for the withholding tax, Merrill suggests that it may have an impact on investor demand although the level of activity and current investor interest in deals from the country suggest that this problem hasn't been as serious as was first expected.