Luxembourg, 20 March 2014

Securitization: real opportunities for the Luxembourg market

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Securitization is a financing and structuring technique providing significant benefits to the real economy and participants in the capital markets. The key feature of a securitization transaction is that funding is performed via a special purpose entity, the securitization company, which issues securities whose reimbursement and remuneration depend on the cash flows received solely through the asset or pool of asset acquired by the securitization company after initial funding.

What about Luxembourg?

The Luxembourg securitization market has constantly grown since 2004 –the year in which the Luxembourg securitization law was introduced - and has continued to grow since uncertainty brought through the financial crisis has progressively reduced. At the end of 2013, Luxembourg was one of the largest European securitization domiciles comprising more than 3000 securitization transactions administered by more than 600 securitization companies. All the benefits of the 2004 securitization law coupled with the clarified Luxembourg position on the Alternative Investment Fund Managers Directive (AIFMD), which exclude the vast majority of Luxembourg securitization companies from the AIFMD scope, have strengthened that growth. This has generated a real craze for setting up new securitization companies over the last 6 months. Many institutions around the world have set up securitization companies for various types of transactions. Repackaging transactions and the structured finance retail asset management area in particular have generated a high volume of new securitization transactions. The Alternative Investment sector is another source of growth like for example for the aircraft and the shipping industries and for green energy projects.

As part of its now well-known AIF Club (“Alternative Investment Fund Club”), EY Luxembourg has reiterated the organization of its yearly securitization event on 20 March 2014, which was an excellent opportunity to share the insights and opportunities of the Luxembourg securitization market with more than 90 registered market participants. According to Olivier Jordant, the EY securitization Leader and Oliver Cloess, the EY Luxembourg securitization coordinator, "the Luxembourg securitization vehicle is the state of the art vehicle in Europe and hence the domiciliation activity has experienced continuing growth. After 10 successful years, it is the time to consider whether the tax, legal and securitization environment in Luxembourg is fully in tune with the international economic and financial environment or whether specific modifications may accelerate the business. This event follows the launch of the 2014 European securitization survey issued by EY, which was addressed to major European Originators, Promoters, Service Providers and Investors. We were proud to present the first insights during the 2014 securitization event”. 

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