1. INTRODUCTION
On 28 September 2013, the Spanish State Gazette published Law 14/2013
of 27 September 2013 on support to entrepreneurs and their
internationalisation (“Law 14/2013”). Law 14/2013 sets
out a broad range of measures aimed at stimulating entrepreneurship,
access to financing and the internationalisation of the business sector
and the Spanish economy.
Among the measures aimed at encouraging the financing of
entrepreneurs, it is worth highlighting the establishment of the legal
framework applicable to two new refinancing instruments for financial
institutions: the international bonds or bonos de
internacionalización (“IB”) and the international
covered bonds or cédulas de internacionalización (“ICB”).
Through these instruments, banks, savings banks, credit cooperatives,
financial entities (establecimientos financieros de crédito)
and the Official Credit Institute (Instituto de Crédito Oficial,
“ICO”) will be able to obtain financing by using as
collateral their portfolios of loans and credits related to the
financing of contracts for the export of Spanish or foreign goods or
services or to the internationalisation of companies resident in Spain
or abroad.
These fixed income securities have the same philosophy and legal
structure as mortgage covered bonds (cédulas hipotecarias) and
public covered bonds (cédulas territoriales), in the case of
ICB, and as mortgage bonds (bonos hipotecarios), in the case of
IB. Their distinguishing feature as compared to the former traditional products is
the eligibility criteria that the loans and credits serving as
collateral must fulfil.
Although the legal framework applicable to ICB and IB is yet to be
developed by ancillary regulations, the main characteristics of these
instruments are set out in Law 14/2013 and summarised below.
2. COLLATERAL
Without prejudice to the universal unlimited liability of the issuer,
principal and interest under ICB and IB are specially secured (in
accordance with the framework outlined below), by certain type of loans
or credits, as well as by substitute assets (activos de sustitución)
and the economic flows generated in favour of the issuer by the
derivative financial instruments linked to a specific issuance, if any.
2.1. Loans and credits serving as collateral
Principal and interest under IB will be specially secured by loans and
credits fulfilling the eligibility criteria set out below and that are
specifically allocated to the issuance pursuant to the issuance document.
Likewise, principal and interest under ICB will be specially secured by
the loans and credits fulfilling the eligibility criteria set out below
that at all times form part of the issuer’s portfolio and are not
allocated to an IB issuance.
The criteria that loans and credits must fulfil to be eligible as
collateral for the issuance of ICB and IB are the following:
(i) They must be related to the financing of contracts for the export
of Spanish or foreign goods or services or to the internationalisation
of companies resident in Spain or abroad.
(ii) One of the circumstances below must concur:
(a) The loans or credits must have been granted to central authorities,
central banks, regional authorities, local authorities or public sector
entities of the European Union, provided that the borrower is not an
entity of the Spanish public sector[1].
(b) The loans or credits must have been granted to central authorities,
central banks, regional authorities, local authorities, public sector
entities not forming part of the European Union, or to multilateral
development banks or international organisations.
(c) The loans or credits must be secured by personal guarantees (including
credit insurance) provided by central authorities, central banks,
regional authorities, local authorities, public sector entities, export
credits agencies or entities of an analogous nature acting on behalf of
a public authority, provided that the guarantor or insurer is located
within the European Union.
(d) The loans or credits must be secured by personal guarantees (including
credit insurance) provided by central authorities, central banks,
regional authorities, local authorities, public sector entities, export
credits agencies or entities of an analogous nature acting on behalf of
a public authority not belonging to the European Union, or by
multilateral development banks or international organisations.
(iii) They must have a high degree of credit-worthiness and will be
deemed so in the following cases:
(1) In the cases described in paragraphs (ii)(a) and (ii)(c) above.
(2) In the cases described in paragraphs (ii)(b) and (ii)(d) above,
provided that the borrower, guarantor or insurer (as the case may be)
has the necessary credit-worthiness so that ICB or IB can benefit from
the preferential regime applicable to the guaranteed bonds under the
legal framework on the solvency of credit entities.
Likewise, loans and credits granted to companies and related to the
financing of contracts for the export of Spanish or foreign goods or
services or to the internationalisation of companies resident in Spain
or abroad will serve as collateral for the issuance of ICB or IB,
provided that they are subject to a 50% credit risk weighting for the
purposes of calculating the minimum equity requirements applicable to
credit entities under the legal framework on the solvency of credit
entities. This category will include loans and credits granted by the
ICO to financial institutions within the ICO internationalisation credit
lines, provided that they fulfil the 50% credit risk weighting condition.
2.2. Other collateral assets
In addition, principal and interest under ICB and IB will be
specially secured, where the relevant issuance so establishes, by:
(i) Certain types of low risk and high liquidity assets called
substitute assets (activos de sustitución) and set out in Law
14/2013 (or that are provided for under ancillary regulations), up to 5%
(in the case of ICB issuances) or 10% (in the case of IB issuances) of
the issued principal amount.
(ii) The economic flows generated by the derivative financial
instruments linked to the relevant issuance (e.g., exchange rate
derivatives).
3. FORMALITIES
The formalities for the issuance of ICB and IB are similar to those
for the issuance of mortgage covered bonds and mortgage bonds, mainly:
(i) ICB issuances will not require the granting of a public deed or
its registration with the Commercial Registry.
(ii) No syndicate of IB holders is required.
(iii) The legal framework applicable to the issuance of notes by
Spanish companies will not apply to the issuance of ICB.
(iv) The issuance will be subject to the securities markets’ legal
framework (especially, regarding prospectus requirements), if and where
applicable.
(v) The issuer must keep an accounting log in which the issuer will
record ICB and IB issuances, as well as the assets that serve as
collateral to them (distinguishing loans or credits, substitute assets
and derivatives).
4. ISSUANCE THRESHOLDS
Law 14/2013 establishes thresholds for the issuance of ICB and IB
with the aim of ensuring that the flows from collateral assets are
sufficient to cover payments under ICB and IB:
(i) Threshold for ICB issuances: Issuers cannot have ICB issued and
outstanding at any time for a principal amount in excess of 70% of the
outstanding principal amounts (in aggregate) of the existing eligible
loans and credits of the issuer’s portfolio and that have not been
allocated to an IB issuance.
(ii) Threshold for IB issuances: Discounted value of IB will be at
least 2% lower than the discounted value of the affected loans and
credits
If the issuance thresholds are surpassed, the issuer will be obliged
to carry out, within three months, corrective measures to restore the
proportion (such as the acquisition of its own ICB or IB for
amortisation, allocating more loans, credits or substitute assets to the
issuance, or increasing the eligible loans portfolio). While none of the
corrective measures are implemented, the issuer must cover the deficit
by means of cash or public fund deposits opened with the Bank of Spain.
5. SCOPE OF THE COLLATERAL
The special rights that principal and interest under ICB and IB enjoy
over the collateral assets described in section 2 above are as follows:
(i) ICB and IB holders will have the rights set out under article 1922
of the Spanish Civil Code with priority over any other creditor of the
issuer in respect of the collateral assets. All ICB holders, regardless
of the date of issuance of ICB, will have the same preference over the
collateral assets.
(ii) In the event of an issuer’s insolvency, ICB and IB holders will
be regarded as specially privileged creditors (acreedores
especialmente privilegiados) according to the Spanish Insolvency
Law. Nevertheless, during the insolvency proceedings, principal and
interest obligations accrued under those ICB and IB issued before the
declaration of insolvency will be timely paid as credits against the
insolvent estate (crédito contra la masa) up to the amounts
collected from the relevant collateral assets.
6. MISCELLANEOUS
In line with the legal framework of the mortgage covered bonds and
mortgage bonds, Law 14/2013 has established additional rules to increase
the appeal of these new issuance instruments:
(i) The issuance, transfer, cancellation or reimbursement of ICB and
IB will be subject to the exemption provided in the Transfer Tax and
Stamp Duty Law.
(ii) ICB and IB will be eligible investments for (a) insurance
entities (to cover their technical provisions); (b) pension funds; (c)
mutual funds; and (d) social security entities.
1. INTRODUCTION
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