Securitization markets in Greece

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THE NEW GREEK PRIVATE SECTOR SECURITISATION REGIME

1. Following the public sector securitisation law 2801/2000, the Government of the Hellenic Republic recently enacted a specific legislation in relation to securitisations of both receivables and real estate in Greece for non-government originators. The new securitisation law 3156/2003 (published in Government Gazette issue n°. 157/A/25.06.03) provides a clear cut legal framework with respect to securitisation of trade receivables (Article 10) and real estate assets (Article 11) originated by a commercial entity or a credit institution resident in Greece (the Originator).

2. In particular, Article 10 of the securitisation law allows an Originator to sell its trade receivables to a special purpose company (SPC) established in Greece or abroad. Such an SPC must also issue, through private placement only, bonds in connection with the securitisation of such receivables. The sale of the receivables is to be governed by assignment provisions of Article 455 and seq. of the Greek Civil Code which provides that ancillary rights concerning the receivables, including guarantees, mortgages, mortgage pre-notations and other security interests, will be transferred by the Originator to the SPC along with the transfer of the receivables. Such transfer is considered as a "true sale" and is governed by sale provisions of Article 513 and seq. of the Greek Civil Code providing for full transfer of legal ownership.

3. The SPC is expressly allowed by the law to enter into, for securitisation or risk hedging purposes, any type of loan or credit agreement or any insurance or security contract, including derivative contracts.

4. In the case of trade receivables, a summary of the receivables sale agreement must be registered with the competent public registry (??e????f??a?e??), in accordance with the procedure provided for by Article 3 of the Greek law 2844/2000 (Government Gazette issue n°. A220 20001012) on registered pledge. Following such a registration the transfer of the receivables is effected and perfected. At the same time, the obligors of the receivables are deemed to have notice of the transfer of the receivables without any further notification.

5. Following the registration of the summary of the receivables sale agreement, the validity of the sale of the receivables is not affected by any insolvency proceedings in relation to the Originator or the SPC. In addition, no security interest or encumbrance can be created over the receivables other than the interest that is created pursuant to the securitisation law which comprises a pledge operating by law over the receivables in favour of the bondholders issued in connection with the securitisation of the receivables and also the other creditors of the SPC. Such a pledge rank ahead of the claims of any statutory preferential creditors.

6. The servicing in relation to the receivables can be carried out by: (i) the Originator; (ii) a credit institution or financial institution in the European Economic Area; or (iii) a third party that had guaranteed or serviced the receivables prior to the time of transfer to the SPC. However, where the SPC is not resident in Greece, the servicer must be "established" in Greece if the receivables are payable by Greek consumers.

7. The securitisation law contains also express provisions with respect to segregation principle and anti-commingling risk. In effect, all the proceeds of the collections made in respect of the receivables must immediately upon receipt be deposited by the servicer or any other person making such collections in a separate interest-bearing bank account held either with the servicer, provided that the latter is a credit institution, or with another credit institution or financial institution in the European Economic Area. All such amounts along with any security created over the receivables do not form part of the servicer's estate on its liquidation (or any other person's estate making such collections). Equally, they do not form part of the custodian's estate. As a consequence, they are not available to the creditors of the servicer or the custodian (or, as the case may be, any other person making such collections).

8. Amounts standing to the credit of the segregated bank account into which collections are deposited are also secured in favour of the holders of the bonds issued in connection with the securitisation of the receivables and the other creditors of the SPC by virtue of a pledge operating by law.

9. Article 11 of the new securitisation law enables the transfer of real estate located in Greece to an SPC which issues bonds in relation to the securitisation of such real estate. For the purposes of real estate securitisation, the SPC must be resident in Greece. Any income generated from the real estate being securitised is used to reimburse the bondholders. A summary of the real estate sale agreement must be registered with the competent public registry, in accordance with the procedure set forth under Article 3 of the Greek law 2844/00.

10. Finally, Article 14 of the new securitisation law 3156/2003 deals with the tax treatment of securitisation transactions. In effect, the law provides, inter alias, that issues of bonds for the purposes of securitisation of assets or real estate and capital payments made in relation to these bonds or out of the securitised receivables are exempted from any, direct or indirect, taxation. Likewise, the transfer of receivables to and from the SCP, the servicing and making collections in relation to such receivables, and any credit facility or derivative agreements entered into for the shake of a securitisation transaction are equally exempted from any direct or indirect tax obligation, stamp duty, contribution or any other charge in favour of the Treasury. Any gains arising out of the transfer of receivables to the SPC along with the entering into any credit facility or derivative contract are exempted for income tax purposes.

On the contrary, withholding tax could be charged on interest payments made by Greek debtors to a foreign SPC, unless otherwise provided for by a double tax treaty.

11. Following the enactment of the new securitisation law in Greece, the first private sector RMBS transaction which raised approximately €250m, was carried out in November 2003 by Aspis Bank, a mortgage-lending specialist established in 1992. More recently, EFG Eurobank Ergasias (the third-largest bank in Greece in terms of deposits) set up a €750m residential mortgage securitisation programme on the basis of the new legal framework.

Dimitrios Logizidis, Gide Loyrette Nouel (Paris) [LOGIZIDIS@gide.com]

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