The €4.6 billion refinancing of the Republic of Italy's SCIP-2 securitization, which is due to be priced this week, is only taking place because the government's transaction falls outside the guidelines of the country's national securitization law. "In the context of Law 130, such a refinancing is impossible," said Corrado Angellelli, partner in the Milan office of law-firm Clifford Chance.
Law 130 prohibits borrowers from using the proceeds of a securitization to refinance an existing deal. As a result, Angellelli said this marks the first Italian securitization where the proceeds will be used to refinance an existing deal, although he stressed it does not act as a precedent for private sector issuers.
The second residential and commercial mortgage-backed deal from the Republic of Italy is on track to miss a soft bullet maturity this month. The issuer is selling additional mortgage-backed bonds with longer maturities to repay holders of the bonds that will not be repaid by their expected maturities.
Price talk on the new €1 billion triple-A tranche with one-year expected maturity is in the low teens, while that on the €3.1 billion triple-A rated A5 tranche with 2.3 years average life is in the low 20s and on the €500 million double-A rated B2 tranche with 3.6 years expected maturity is in the 50 to 55 area, according to an official at UBS in London. UBS is underwriting the deal along with Barclays Capital and Mediobanca.
Societa di Cartolarizzazione Immobili Pubblici 2002, or SCIP-2, is the second transaction by the Republic of Italy securitizing proceeds from the sale and rental income from residential and commercial units belonging to seven public social entities. The €6.6 billion transaction was priced in December 2002 in was underwritten by ABN Amro, Banca Nazionale del Lavoro, Citigroup and J.P. Morgan.
