Securitisation in Portugal

This page updated regularly deals with securitization developments in Portugal. If you have any news or development to contribute to this, please write to me.

Recent updates: 18th Feb 2002

Market data for 2001 incorporated..

Recent additions: Nov. 9, 2000/ 27th March, 2001:
Rating agency Standard and Poor's is optimistic about mortgage securitisation in Portugal - see news item here.

There have been very few securitisation transactions in Portugal, primarily due to lack of a cohesive legal framework. Portugal banking segment is fully liberalised and so is the investment and capital market, but securitisation transactions are yet to find a wide spread use.

One of the recent transactions were a securitisation of consumer loans originated by Banco Comercial Portugues (BCP), Portugal's largest bank. The transaction involved a total of DM435.1m. The issuer was an SPV known as Nova, which issued the notes, and used the proceeds to pay cash into a Deutsche Bank account in London. Deutsche Bank then made an equivalent deposit to one of its branches in Portugal, and this money was used to fund the purchase of the loan portfolio from BCP. This structuring made it possible to avoid withholding tax and stamp duty.

Developments in 2000 and 2001

In year 2001, the market volume reached aprox USD 3.6 billion, sparked by new CDOs.

Moody's on Feb. 22, 2001 released a special report titled 2000 Year In Review and 2001 Outlook Portuguese Structured Finance Market — Storm Ahead After The Break? The report is a commentary on the performance in year 2000 and what year 2001 has in store.

The title of the Moody's report refers to the dismal performance of securitization market in Portugal, inspite of the passage of the new law in Nov., 1999. The volume came down to Euro 762 million from 1999’s Euro 1.4 billion. There were only 4 issuances in 2000. Moody's report says that none of the issuances in 2000 were under the new law as corresponding changes to the tax regime were still pending.

As to the outlook for 2001, Moody's has the following to say:

"Moody’s expects to see a moderate rise in new transactions issued by Portuguese originators in 2001. Moody’ does not expect the number of originators to increase significantly, instead previous issuers (financial institutions and independent financing houses) are expected to tap the market in 2001. Moody’s anticipates originators to:

— Return to the structured finance market with repeat transactions to refinance growing portfolios;
— Increase liquidity through the issuance of repeat deals; and
— Securitise new asset classes, with an emphasis on real estate backed transactions.

Moody’s expects the first Portuguese RMBS transactions to be launched in 2001 involving local STCs and FTCs. Once a first structure is in place, we see good potential for the Portuguese RMBS market to develop similarly to the fast growing Irish RMBS market. Moody’s will implement a country-specific RMBS model to accommodate the analysis of Portuguese mortgage loans, as we have done for other European RMBS markets."

The list also includes the country first collateralized bond obligation (CBO) deal of EURO 312 million called Tagus Global Bond Securitization No. 1 originated by Banco Comercial Portugues.

 Legal initiatives:

The law on securitisations was passed in November 1999.

Full text of the law is there on this site - click here to access the Portugese text of the law

The securitisation law has given two choices for the securitisation structure, in what is referred to as the STCs and the FTCs. The FTCs are little more complicated, more regulated form. FTCs seem to be similar to mutual funds in nature, while STCs are SPV-structure vehicles. STC structure seems to have been inspired by the Spanish law.

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