S&P: New French Law Could Boost Securitization Market.Business Editors PARIS--(BUSINESS WIRE)--Aug. 20, 2003 Standard & Poor's--A new French law could provide the basis for growth in French securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. volumes, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a report published today by Standard & Poor's Ratings Services. The "Law on Financial Security" was enacted on Aug. 1, 2003, although several provisions, including some pertaining to securitization, are subject to ministerial decree, which is expected to be published by the end of 2003. "Certain legal restrictions in the 1988 securitization law on "fonds communs de creances" (FCCs) have contributed to France lying sixth in the European securitization league tables," said Nicolas Malaterre, credit analyst at Standard & Poor's Structured Finance Ratings group in Paris. "Clearly, the size of the French securitization market is not in line with the volume of assets that could be securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. ." Mr. Malaterre predicts that this may change when the provisions are decreed. "Under the new law, direct issues of FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. debt instruments--such as notes, bonds, or CP--in the domestic and international markets will be possible, although the FCC must still issue units representing these assets," he said. Another change concerns derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. . "Market participants expect that FCCs will be allowed to act as credit protection sellers in synthetic CDO (Collaborative Data Objects) A programming interface from Microsoft for accessing MAPI-based e-mail, calendaring and scheduling servers. Originally called "OLE Messaging" and "Active Messaging," CDO wraps the Enhanced MAPI library into a COM object that provides the transactions," said Solange Fougere, legal counsel to Standard & Poor's Ratings Services in Paris. "By taking on the role of swap counterparty and issuer, future FCCs could have a substantial effect on the European synthetic CDO market." Ms. Fougere explained that the new law also recognizes a third-party beneficiary third-party beneficiary n. a person who is not a party to a contract, but has legal rights to enforce the contract or share in proceeds because the contract was made for the third party's benefit. account system ("compte a affectation af·fec·ta·tion n. 1. A show, pretense, or display. 2. a. Behavior that is assumed rather than natural; artificiality. b. A particular habit, as of speech or dress, adopted to give a false impression. speciale"), allowing segregation of the collections from securitized assets and those from the originator's operating assets Operating Assets Another term for working capital. . "The legal recognition of dedicated accounts is a very positive step that can only benefit the FCC market," she added. The new law also clarifies certain legal aspects of the transfer of receivables to FCCs, although the French parliament's refusal to insulate the transfer of future receivables from insolvency proceedings is a source of disappointment among market participants. "While future receivables are transferable under French law, it is doubtful that the transfer would survive the seller's insolvency owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de a French Supreme Court ruling on the subject as well as the subsequent rejection of an amendment to this ruling by the French Parliament," Ms. Fougere said. The current legal uncertainties on true sale of future receivables represent a serious obstacle for assets such as lease receivables, Ms. Fougere concluded. "The hesitation of the French Parliament is disappointing in that it may temper the overall growth in the French market borne on the back of the new law." The full article, entitled "France Amends Securitization Law to Create New Market Opportunities" is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. Alternatively, call one of Standard & Poor's Ratings Desks: London (44) 20-7847-7400; Paris (33) 1-4420-6705; Frankfurt (49) 69-33-999-223; or Stockholm (46) 8-440-5916. Members of the media may contact the Press Office Hotline on (44) 20-7826-3605 or via media_europe@standardandpoors.com. CONTACT E-MAIL ADDRESSES solange_fougere@standardandpoors.com ian_bell@standardandpoors.com nicolas_malaterre@standardandpoors.com StructuredFinanceEurope@standardandpoors.com Copyright (c) 2003, Standard & Poor's Ratings Services |
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