The Italian Ministry of Treasury is moving to restart the country's E8 billion (and growing) lease securitization market after a Supreme Court ruling wreaked havoc on the asset class. A new law has been introduced into the budget which will supplant the court ruling that a lease contract could be terminated if the originator defaults, says Lorella Campi, a spokeswoman at the Ministry of Treasury in Rome.
Paolo Calderaro, partner at Clifford Chance Studio Legale in Rome, says the new law should be passed by the end of the year, but that the backlog of leasing deals in the pipeline probably will not get done until early next year. He notes the court ruling was of particular importance because it directly affected translativo leases--where the lease-life is shorter than the life of the asset. Translativo leases are the ones typical securitized in Italy and the court ruled that in the event of the lessor's insolvency, the lease contract could be terminated. In the case of a lease securitization, "suddenly the receivables would disappear," says Calderaro. The new rule should nullify the court ruling.
As of last week, all three major rating agencies were scrambling to determine the impact of the court ruling (BW, 11/3). The court ruling was made earlier this year, but only came to the attention of the market at the end of October. The agencies said they were taking legal advice on the new law.
Based on discussions and on an understanding of the content and the timing of the proposed changes to the leasing law, Standard & Poor's does not intend to take any rating action on Italian lease-backed transactions, according to Roberto Paciotti, analyst at S&P in Milan. And, provided the Ministry of Treasury's legislative changes are introduced swiftly and are in line with the discussions that have taken place already, S&P does not foresee making changes in the future.
Calls to Richard Lindsay, a spokesman at Fitch Ratings in London, and to Michelanglo Margaria, who looks after lease deals for Moody's Investors Service in Milan, were not returned.
