On 9 February 2022, the Luxembourg Parliament adopted the draft law amending the law of 22 March 2004 on securitisation (the “Securitisation Law”).
The most important adjustments to this law, which is also important for German issuers, are:
- Permitted financial instruments: Securitisation special purpose vehicles (SPVs) will in future be allowed to finance themselves through financial instruments, i.e. in addition to securities also in whole or in part with loans, provided that the value or yield of these loans corresponds to the development of the underlying assets. This will expand the financing options and increase legal certainty.
- SPVs will be able to actively manage a securitised debt portfolio, provided that the securities to be issued by SPVs are not publicly available.
- A new set of rules on legal subordination will be introduced for financial instruments issued by SPVs. SPVs may deviate from these rules either contractually or in their constitutive documents.
- The criteria of the Luxembourg financial supervisory authority CSSF for the public issuance of financial instruments are included in the amended securitisation law. Until now, they were only included as guidance in the CSSF’s FAQ.
- The amended Securitisation Law provides that the annual accounts of a funded sub-fund (compartment) can only be approved by the shareholders of that sub-fund and that the profits and distributable reserves of funded sub-funds can be calculated on a sub-fund basis.
- In addition to the legal forms already provided for in the Securitisation Law, SPVs may also take the form of a company with unlimited liability (société en nom collectif), a simple limited partnership (société en commandite simple), a special limited partnership (société en commandite spéciale) and a simplified joint stock company (société par actions simplifiée).
As a result, the legal certainty for classical securitisations increases with regard to the choice of financial instruments and the more efficient use of compartments. In addition, the conditions will be created to be able to carry out CLO transactions in Luxembourg in the future.