S C I P II S C I P II 6,637 million 6,637 million Investor - - PowerPoint PPT Presentation
S.C.I.P. Societ Cartolarizzazione Immobili Pubblici S.r.l. S.C.I.P. Societ Cartolarizzazione Immobili Pubblici S.r.l. Second Securitisation of Italian Real Estate Assets Second Securitisation of Italian Real Estate Assets S C I P II S C I
€ 6,637 million € 6,637 million Investor Presentation Investor Presentation December 2002 December 2002
S.C.I.P. Società Cartolarizzazione Immobili Pubblici S.r.l. S.C.I.P. Società Cartolarizzazione Immobili Pubblici S.r.l. Second Securitisation of Italian Real Estate Assets Second Securitisation of Italian Real Estate Assets
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Table of Contents Table of Contents
1. 1.
INTRODUCTION INTRODUCTION
2. 2.
TRANSACTION SUMMARY TRANSACTION SUMMARY
3. 3.
THE PORTFOLIO THE PORTFOLIO
4. 4.
BUSINESS PLAN BUSINESS PLAN
5. 5.
THE STRUCTURE THE STRUCTURE
6. 6.
CONCLUSIONS CONCLUSIONS Appendix A Appendix A – Legal Framework Legal Framework Appendix B Appendix B – New Mortgage New Mortgage Convenzione Convenzione Appendix C Appendix C – Performance of previous deals sponsored by MEF Performance of previous deals sponsored by MEF Appendix D Appendix D – Book runners Contact List Book runners Contact List
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Introduction Introduction
The Italian
The Italian Ministry of Economy and Finance Ministry of Economy and Finance has embarked on a real has embarked on a real estate rationalization strategy aimed at achieving: estate rationalization strategy aimed at achieving:
debt reduction and increase in efficiency of the Public Sector through the hrough the disposal of public assets (receivables, properties and equity st disposal of public assets (receivables, properties and equity stakes) akes)
yield improvement
This transaction meets the following objectives:
This transaction meets the following objectives:
It manages to privatise real estate public assets through the ABS market. It S market. It achieves the social goal to turn tenants into owners (62,880 uni achieves the social goal to turn tenants into owners (62,880 units being ts being transferred to SCIP S.r.l. in 2002; 27,250 units and 262 commer transferred to SCIP S.r.l. in 2002; 27,250 units and 262 commercial cial buildings transferred in 2001) buildings transferred in 2001)
It improves the overall efficiency of the social security entities by switching es by switching “low yield” and “non strategic” assets into “safe” liquidity “low yield” and “non strategic” assets into “safe” liquidity to be invested at to be invested at market rates market rates
It reduces debt through a reliable asset disposal process
It takes advantage of a very buoyant and still improving Italian real estate real estate market market
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Introduction Introduction
The transaction is the largest euro issue ever (62,880 units tra
The transaction is the largest euro issue ever (62,880 units transferred for a nsferred for a total issuance of more than Euro 6.6 billion) total issuance of more than Euro 6.6 billion)
Full and effective cooperation and procedures have been defined
Full and effective cooperation and procedures have been defined between: between:
The Ministry of Economy and Finance
The Ministry of Labour Labour
Social securities entities
Agenzia del del Demanio Demanio
Agenzia del del Territorio Territorio
The National Notaries Association
Mortgage banks
The transaction’s capital structure is fully in line with
The transaction’s capital structure is fully in line with Eurostat’s Eurostat’s requirements requirements
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Introduction Introduction
Transaction structured in order to achieve:
Transaction structured in order to achieve:
Highest transparency and efficiency in the disposal process
Fairness conditions on the offering of disposed units: – Pregio Pregio units offered to tenants with no discount units offered to tenants with no discount – As per relevant Law, discount will apply only to tenants of non As per relevant Law, discount will apply only to tenants of non-pregio pregio units units
Transaction is designed for maintenance of socially protective
Transaction is designed for maintenance of socially protective laws laws
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Transaction Summary Transaction Summary
This offering (“SCIP 2”) is the second transaction under the sec
This offering (“SCIP 2”) is the second transaction under the securitisation uritisation programme through which the Republic of Italy is privatising pub programme through which the Republic of Italy is privatising publicly licly-owned
real estate assets real estate assets
The Italian Ministry of Economy and Finance is the sponsor of th
The Italian Ministry of Economy and Finance is the sponsor of the transaction e transaction
Total issuance amount is equal to approximately € 6,637 million
Total issuance amount is equal to approximately € 6,637 million
Largest government asset securitisation and largest euro ABS eve
Largest government asset securitisation and largest euro ABS ever
For the first time, the Republic of Italy will also transfer a p
For the first time, the Republic of Italy will also transfer a portion of its real
estate properties, which will be managed through estate properties, which will be managed through Agenzia Agenzia del del Demanio Demanio (“ (“AdD AdD”) ”)
All classes of notes will be rated by Fitch Ratings, Moody’s and
All classes of notes will be rated by Fitch Ratings, Moody’s and S&P S&P
SCIP s.r.l. will issue notes rated triple A, double A and single
SCIP s.r.l. will issue notes rated triple A, double A and single A to fully comply A to fully comply with with Eurostat Eurostat requirements requirements
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All tranches have a soft bullet maturity All tranches have a soft bullet maturity
Capital Structure
Classes Classes A1 A1 A2 A2 A3 A3 B C Ratings Ratings AAA/ AAA/Aaa Aaa/AAA /AAA AAA/ AAA/Aaa Aaa/AAA /AAA AAA/ AAA/Aaa Aaa/AAA /AAA AA/Aa3/AA AA/Aa3/AA A/A3/A A/A3/A Amount Amount € 1,500 million € 1,500 million € 2,000 million € 2,000 million € 1,743 million € 1,743 million € 858 million € 858 million € 536 million € 536 million Expected Maturity Expected Maturity April 2004 April 2004 April 2005 April 2005 April 2006 April 2006 October 2006 October 2006 October 2006 October 2006 Legal Maturity Legal Maturity April 2006 April 2006 April 2007 April 2007 October 2008 October 2008 October 2008 October 2008 October 2008 October 2008 % % 22.6% 22.6% 30.1% 30.1% 26.2% 26.2% 12.9% 12.9% 8.1% 8.1%
Total Amount: € 6,637,000,000.00 Total Amount: € 6,637,000,000.00
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Offering Summary Offering Summary
Coupon
Coupon Euro notes: 3m Euro notes: 3m Euribor Euribor + spread + spread
Spreads
Spreads 0.20%, 0.27% and 0.32% for triple A Notes 0.20%, 0.27% and 0.32% for triple A Notes 0.65% for double A and 1.17% for single A Notes 0.65% for double A and 1.17% for single A Notes
Coupon Frequency
Coupon Frequency Quarterly on 26 January, April, July, October. First Quarterly on 26 January, April, July, October. First coupon on April 26, 2003 coupon on April 26, 2003
Listing
Listing Luxembourg Luxembourg
Trading
Trading MTS for all MTS for all tranches tranches
Market Making
Market Making The Joint The Joint Bookrunners Bookrunners signed a secondary signed a secondary market making agreement with the MEF and with MTS market making agreement with the MEF and with MTS
Settlement
Settlement Montetitoli Montetitoli, , Euroclear Euroclear, , Clearstream Clearstream
Governing Law
Governing Law Italian Italian
Status
Status Eurobond format Eurobond format
Tax Treatment
Tax Treatment Not subject to any withholding tax Not subject to any withholding tax
Expected BIS
Expected BIS Risk Weighting Risk Weighting 100% 100%
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Key Parties Key Parties
Issuer: S.C.I.P. S.C.I.P. Società Società Cartolarizzazione Cartolarizzazione Immobili Pubblici Immobili Pubblici S.r.l. (“SCIP S.r.l”) S.r.l. (“SCIP S.r.l”)
Sponsor: the Italian the Italian Ministry of Economy and Finance
Ministry of Economy and Finance (“MEF”)
(“MEF”)
Contributors: ENPALS, INAIL, INPDAI, INPDAP, INPS, IPOST, IPSEMA, (together, ENPALS, INAIL, INPDAI, INPDAP, INPS, IPOST, IPSEMA, (together, the “Social Security Entities”) and the Republic of Italy the “Social Security Entities”) and the Republic of Italy
Asset Managers: ENPALS, INAIL, INPDAI, INPDAP, INPS, IPOST, IPSEMA, and MA, and AdD AdD
Commercial Sales Manager: Lazard
Lazard Real Estate / Real Estate / Fintecna Fintecna
Asset Appraiser: Agenzia Agenzia del del Territorio Territorio (“ (“AdT AdT”) ”)
Independent Real Estate Appraiser: Patrigest Patrigest S.p.A. (“ S.p.A. (“Patrigest Patrigest”), subsidiary of the ”), subsidiary of the Gabetti Gabetti Group, listed on the Milan Stock Exchange Group, listed on the Milan Stock Exchange
Auditor and Program Administrator: KPMG
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Transaction Highlights Transaction Highlights
Highly granular portfolio mainly composed of residential assets
Highly granular portfolio mainly composed of residential assets (approximately (approximately 71.5% by offer price and 84.7% by number of units), with some co 71.5% by offer price and 84.7% by number of units), with some commercial mmercial units mostly part of residential building units mostly part of residential building
No additional supply/demand (in “SCIP1” over 80% of buyers were
No additional supply/demand (in “SCIP1” over 80% of buyers were tenants) tenants)
SCIP 2 assets are segregated from the previous SCIP portfolio (“
SCIP 2 assets are segregated from the previous SCIP portfolio (“SCIP 1”) and SCIP 1”) and from assets deriving from future transactions using the same veh from assets deriving from future transactions using the same vehicle icle
Experience of the Social Security Entities as Asset Managers and
Experience of the Social Security Entities as Asset Managers and Sellers Sellers
Portfolio valuation completed and fairness opinion issued by an
Portfolio valuation completed and fairness opinion issued by an independent independent real estate appraiser, real estate appraiser, Patrigest Patrigest
Streamlined asset disposal process agreed by all involved partie
Streamlined asset disposal process agreed by all involved parties
Reporting co
Reporting co-ordinated
by Program Administrator, who will keep track of Asset Managers’ performance Managers’ performance
A professional 3rd party will manage the disposal of commercial
A professional 3rd party will manage the disposal of commercial assets assets
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SCIP 2 Portfolio SCIP 2 Portfolio
The portfolio consists of 62,880 residential and commercial prop
The portfolio consists of 62,880 residential and commercial properties located erties located in Italy. Commercial properties are mainly retail spaces, i.e. s in Italy. Commercial properties are mainly retail spaces, i.e. small shops and mall shops and
SCIP 2 Breakdown by Contributor* SCIP 2 Breakdown by Property Use* *Calculated on the Offer Price
State 0,5% IPSEMA 0,5% ENPALS 0,7% INPS 8,4% INPDAI 29,7% INAIL 16,5% INPDAP 43,3% IPOST 0,4% Residential 71.5% Commercial 28.5%
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Almost 85% of the portfolio is comprised of residential units
Almost 85% of the portfolio is comprised of residential units
SCIP 2 Breakdown by type of property
SCIP 2 Portfolio SCIP 2 Portfolio
Property Type Number of Units Surface (sqm.) Commercial 9,639 15.3% 1,342,761 22.1% Residential 53,241 84.7% 4,737,676 77.9% Total 62,880 100.0% 6,080,437 100.0%
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SCIP 2 Portfolio SCIP 2 Portfolio
Rome and Milan, the two largest real estate markets in Italy, re
Rome and Milan, the two largest real estate markets in Italy, represent around present around 61% of the Offer Price of the portfolio 61% of the Offer Price of the portfolio
62% of the portfolio is concentrated in central Italy
62% of the portfolio is concentrated in central Italy
SCIP 2 Breakdown by Geographical Area* SCIP 2 Breakdown by City* *Percentage expressed by Offer Price of the Portfolio * Calculated on the Offer Price
Islands 2% Centre 62% South 7% North 29% Bologna 3,0% Milan 8,5% Genoa 2,5% Naples 2,9% Rome 52,4% Other 30,7%
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Residential portfolio Residential portfolio
Average residential unit size is around 89
Average residential unit size is around 89 sqm sqm.
More than 93% of the residential units are occupied by tenants
More than 93% of the residential units are occupied by tenants Non residential portfolio Non residential portfolio
Average non
Average non-residential unit size is around 139 residential unit size is around 139 sqm sqm.
The non
The non-residential portfolio is mainly composed by small shops and offi residential portfolio is mainly composed by small shops and offices, ces, which represent around 64% of the total commercial Offer Price which represent around 64% of the total commercial Offer Price
SCIP 2 Portfolio SCIP 2 Portfolio
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Portfolio Valuation Portfolio Valuation
The value of the portfolio has been determined by
The value of the portfolio has been determined by AdT AdT as the sum of as the sum of individual Vacant Possession Values on a building by building ba individual Vacant Possession Values on a building by building basis sis
The Offer Price has been calculated by applying to the value of
The Offer Price has been calculated by applying to the value of non non-pregio pregio residential occupied units as determined by residential occupied units as determined by AdT AdT the the relevant discounts relevant discounts applied to residential assets as per Law 410 applied to residential assets as per Law 410
The total Offer Price is € 7,797 million
The total Offer Price is € 7,797 million
AdT
AdT is an autonomous public body providing services in connection w is an autonomous public body providing services in connection with real ith real estate valuations, and on technical and cadastral analysis on pr estate valuations, and on technical and cadastral analysis on properties
Patrigest
Patrigest will provide a fairness opinion on valuations conducted by will provide a fairness opinion on valuations conducted by AdT AdT
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Portfolio Valuation Methodology Portfolio Valuation Methodology
AdT
AdT has adopted a market has adopted a market-based methodology, which is a combination of the based methodology, which is a combination of the comparative approach and DCF analysis, including site inspection comparative approach and DCF analysis, including site inspections
Determination of the Vacant Possession Value for the unit based
Determination of the Vacant Possession Value for the unit based on recent
market comparables and building quality and conditions market comparables and building quality and conditions
Patrigest
Patrigest appointed to provide a fairness opinion on the appointed to provide a fairness opinion on the AdT AdT valuations, valuations, confirming that: confirming that:
AdT’s valuation methodology is market valuation methodology is market-based and in line with based and in line with internationally internationally recognised recognised standards standards
The Vacant Possession Value of the portfolio as determined by the e AdT AdT is is not higher than not higher than Patrigest Patrigest own estimation of the open market value of the
portfolio portfolio
The fairness opinion is based on:
The fairness opinion is based on:
A review of AdT AdT valuation methodology and portfolio database valuation methodology and portfolio database
A review, including site inspections, of a statistically relevant sample pool t sample pool
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Business Plan Overview Business Plan Overview
Parties benefit from know
Parties benefit from know-how acquired from previous transaction how acquired from previous transaction
Business plan streamlined to increase
Business plan streamlined to increase programme programme efficiency efficiency
SCIP has signed a Convenzione Convenzione with the Italian Notary Association to with the Italian Notary Association to create standardized documentation filing create standardized documentation filing
SCIP has signed a Convenzione Convenzione with the with the AdT AdT in order to manage the in order to manage the valuation on a unit by unit basis valuation on a unit by unit basis
Main documents used in the process are standardized
Main documents used in the process are standardized
Sales of commercial properties conducted by a Commercial Sales M
Sales of commercial properties conducted by a Commercial Sales Manager anager experienced in the property market: experienced in the property market:
– During the last five years, uring the last five years, Lazard Lazard has acted as advisor in more than 30 real has acted as advisor in more than 30 real estate transactions, regarding assets having a total value of ov estate transactions, regarding assets having a total value of over er € 15,000 15,000 million million - Source Source Lazard Lazard Real Estate Real Estate. . – Over the last five years, Over the last five years, Fintecna Fintecna completed completed over 300
property transactions for a a value value in in excess excess of € 600
million - Source Source Fintecna Fintecna
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Business Plan Overview Business Plan Overview
Asset Managers given incentives to perform according to business
Asset Managers given incentives to perform according to business plan plan
Co
Co-operation between the Asset Managers and Commercial Sales Manage
r ensured through contractual obligations and an incentive system ensured through contractual obligations and an incentive system
Reporting requirements streamlined
Reporting requirements streamlined
Improved monitoring process through the Program Administrator th
Improved monitoring process through the Program Administrator that will at will allocate a dedicated team for its implementation allocate a dedicated team for its implementation
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Portfolio Disposal Process Portfolio Disposal Process
The assets will be disposed of in accordance with Law 410. Diffe
The assets will be disposed of in accordance with Law 410. Different rent procedures are followed depending on the type of asset: procedures are followed depending on the type of asset:
Non pregio pregio tenanted residential properties are offered to tenants at a tenanted residential properties are offered to tenants at a discount of 30%. A further discount of up to 15% on the previous discount of 30%. A further discount of up to 15% on the previously ly discounted price is applied if, at least 80% of the residential discounted price is applied if, at least 80% of the residential tenants tenants residing in a building, choose to exercise the purchase option o residing in a building, choose to exercise the purchase option on a n a collective basis collective basis
Pregio residential assets are offered to tenants without discount residential assets are offered to tenants without discount
Vacant, as well as un opted tenanted, residential properties are sold at sold at public auction to the highest bidder public auction to the highest bidder
Commercial properties (vacant and tenanted) are sold at public auction to uction to the highest bidder. Certain tenants are entitled to a pre the highest bidder. Certain tenants are entitled to a pre-emption right when emption right when the property they occupy is sold at auction on a single asset ba the property they occupy is sold at auction on a single asset basis sis
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Asset Managers will be responsible for the preparation of the sa
Asset Managers will be responsible for the preparation of the sale files for all le files for all units (residential and commercial) and for the sale of residenti units (residential and commercial) and for the sale of residential properties al properties from the beginning of each cycle of the selling process (T=0, wh from the beginning of each cycle of the selling process (T=0, when the list of en the list of properties are identified) until completion of the sale (T+180 d properties are identified) until completion of the sale (T+180 days) ays)
The Commercial Property Manager will be responsible for the sale
The Commercial Property Manager will be responsible for the sale of
commercial properties from receipt of the sale files from Asset commercial properties from receipt of the sale files from Asset Managers Managers (T+55) until completion of the sale (T+55) until completion of the sale
Portfolio Disposal Process Portfolio Disposal Process
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A
d T A d T Responsibilities: Responsibilities:
Valuation primary and secondary units secondary units
Cadastral regularisation
Identification pregio pregio assets assets
Ente
Ente Responsibility Responsibility
Assembly primary and secondary units secondary units
Tenancy due diligence
Cadastral regularisation (if not delegated to (if not delegated to A dT A dT)
Identification notary in
Identification notary in charge (CNN) charge (CNN)
Identification mortgage
Identification mortgage bank ( bank (Ente Ente/bank) /bank)
Files delivered to
Files delivered to AdT AdT (i.e. (i.e. atto di atto di provenienza provenienza, , condoni ecc condoni ecc…) in …) in
every primary and every primary and secondary unit secondary unit (Ente Ente)
Collection of
Collection of Cadastral info ( Cadastral info (A d T A d T)
Identification of
Identification of units to be sold units to be sold (Ente Ente)
List of units sent to
List of units sent to Adt Adt, notaries and , notaries and Commercial Sales Commercial Sales Manager Manager
Business Plan Overview
Sale process
T=0 T=0 T=15 T=15 T=45 T=45 T=50 T=50 T=55 T=55
Definition of offer Price for
Definition of offer Price for the letter ( the letter (Ente Ente/A d T A d T)
Finalisation sale files (
Finalisation sale files (Ente Ente)
Delivery sale files of residential
Delivery sale files of residential units to: units to:
Notary in charge
Bank in convenzione convenzione (Ente Ente)
Delivery sale files of non
Delivery sale files of non- residential units to Commercial residential units to Commercial Sale Manager (AM) Sale Manager (AM)
Delivery valuations and sale files to Ente (AdT) Delivery valuations and sale files to Ente (AdT) Residential tenanted Residential tenanted Commercial Commercial Vacant Vacant Properties Properties Go to Go to Auction Auction Go to Go to Auction Auction
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Business Plan Overview (cont’d)
Sale process (residential only)
T=60 T=60 T=65 T=65 T=70 T=70 T=130 T=130 T=145 T=145 T=180 T=180
Sending letters (Ente) Sending letters (Ente)
60 days 60 days
Identification delinquent tenants (Ente)
Receipt of
Receipt of letter delivery letter delivery (Ente Ente)
Expiry option
Expiry option right (Tenant) right (Tenant)
Deadline for
Deadline for set up of set up of mandato mandato collettivo collettivo (Tenant) (Tenant)
Delivery to Notary
Delivery to Notary and Bank and Bank
Mandato collettivo
Agreement execution date execution date
Final sale price
Agreement
Agreement execution execution
Residential tenanted Residential tenanted
Non purchased assets go to auction Non purchased assets go to auction
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Improvements from SCIP 1 structure Improvements from SCIP 1 structure
Definition of
Definition of pregio pregio residential properties : a Decree setting the residential properties : a Decree setting the criteria criteria for for identification of identification of pregio pregio published in August 2002 published in August 2002
Framework for auction process for residential properties defined
Framework for auction process for residential properties defined: first auction : first auction started in October 29 2002 and will be finished at the end of No started in October 29 2002 and will be finished at the end of November 2002 vember 2002
Mortgage banks coverage: a new
Mortgage banks coverage: a new convenzione convenzione (framework agreement) will be (framework agreement) will be signed with banks providing the desired amount of mortgages and signed with banks providing the desired amount of mortgages and adequate adequate coverage of territory at best price involving a higher number of coverage of territory at best price involving a higher number of banks. One of
the eligibility criteria will be the adequate coverage of the It the eligibility criteria will be the adequate coverage of the Italian territory alian territory
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Improvements from SCIP 1 structure Improvements from SCIP 1 structure
Arrangements were made to increase the coordination among partie
Arrangements were made to increase the coordination among parties and the s and the standardization of the disposal process: standardization of the disposal process:
the process timeline was redesigned to the requirements of all involved nvolved parties:Asset Managers, Notaries, parties:Asset Managers, Notaries, AdT AdT and mortgage banks to ensure and mortgage banks to ensure coordination coordination
longer processing time per unit is required but all parties are committed to committed to deliver deliver
Main documents used in the process will have standardised conte
Main documents used in the process will have standardised contents. nts.
Vademecum: : The informative document sent to tenant prior to the offer, The informative document sent to tenant prior to the offer,
Offer letter to tenants will be standardised for all Asset Managers and will ers and will include: offer price, offer expiry date, expiry date for collect include: offer price, offer expiry date, expiry date for collective purchase, ive purchase, details of notary in charge, details of the suggested mortgage b details of notary in charge, details of the suggested mortgage bank, ank, notification of non notification of non-renewal of the lease contract if offer is not exercised renewal of the lease contract if offer is not exercised
Mortgage loan contracts
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Improvements from SCIP 1 structure Improvements from SCIP 1 structure
Reporting format has been re
Reporting format has been re-designed designed
Intended as process tool for the Asset Managers rather than month end h end cumbersome activity cumbersome activity
Responsibility passed to Programme Programme Administrator Administrator
New resources deployed by Programme Programme Administrator to fully support the Administrator to fully support the administration of the disposal process administration of the disposal process
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The Structure The Structure
The current transaction utilises current transaction utilises the the same vehicle same vehicle of the first
transaction and and its assets its assets are are segregated segregated from already existing from already existing and and possible possible future future assets within assets within SCIP SCIP
SCIP will finance will finance the the purchase from purchase from the the proceeds proceeds of the Notes
being issued
Interest rate swaps swaps hedging will hedging will cover cover risks associated with risks associated with the notes the notes
Transfer of Portfolio ABS Notes Issue Proceeds SCIP S.r.l. Investors Liquidity Facility Providers Contributors Contributors
Republic of Italy Ministry of Economy and Finance
Swap Counterparties Asset Managers Asset Managers Commercial Sales Manager Commercial Sales Manager Asset Management Agreements Commercial Sales Management Agreement Transfer Price (ITP + DTP) Transfer Price (ITP + DTP)
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Waterfall Waterfall – – Pre Pre-
enforcement
Note Structure Note Structure
Time tranched tranched, soft bullet structure with repayment of , soft bullet structure with repayment of principal fully sequential amongst the various classes of principal fully sequential amongst the various classes of Notes Notes
Liquidity:364-day revolving facility covering 12 day revolving facility covering 12-months months interest on the Notes interest on the Notes
The Issuer will enter into an interest rate swap agreement in
On going SCIP expenses Third parties fees & expenses Payments due to the liquidity facility provider Interest Rate swap payments Interest on Classes A 1, A 2, A 3 Interest on Class B Notes Class A 1 principal Interest on Class C Notes Class A 2 principal Accumulation Amount Class A 3 principal Class B principal Class C principal Swap termination payments Deferred Transfer Price Asset Managers Asset Managers SCIP S.r.l. Liquidity Facility Provider Swap Counterparties Issuer A vailable Funds Commercial Sales Manager Commercial Sales Manager Proceeds from Property Sales and Rentals Liquidity Subordinated Amounts
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Waterfall Waterfall – – Post Post-
enforcement
On going expenses Third Parties fees & expenses Payments due to the liquidity facility providers Swap payments Interest and Principal on Classes A 1, A2, A 3 Interest and Principal on Class B Interest and Principal on Class C Swap termination payments Deferred Transfer Price
Trigger Notices Trigger Notices
Following the service of a Trigger Notice, the Issuer Available Funds will be used to make payments in the order Available Funds will be used to make payments in the order
Trigger Notices include
Payment default of Interest and/or Principal on the Notes Notes
Unremedied Issuer default on its contractual Issuer default on its contractual
Issuer insolvency, winding-up, unlawfulness, etc. up, unlawfulness, etc.
Asset Managers Asset Managers SCIP S.r.l. Liquidity Facility Provider Swap Counterparties Issuer A vailable Funds Commercial Sales Manager Commercial Sales Manager Proceeds from Property Sales and Rentals Liquidity Subordinated Amount Accumulation A mount
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Conclusions Conclusions
Benchmark transaction
Benchmark transaction
Sponsored by the Italian Ministry of Economy and Finance
Sponsored by the Italian Ministry of Economy and Finance MEF MEF
Second issuance through S.C.I.P. S.r.l. within the real estate
Second issuance through S.C.I.P. S.r.l. within the real estate privatisation programme of the Republic of Italy privatisation programme of the Republic of Italy
Large and granular real estate portfolio
Large and granular real estate portfolio
Experienced Asset Managers and Sellers (SCIP 1)
Experienced Asset Managers and Sellers (SCIP 1)
Improved disposal process
Improved disposal process
Valuation by
Valuation by AdT AdT and and Patrigest Patrigest in place at closing in place at closing
Strong legal structure
Strong legal structure
Improved reporting
Improved reporting
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Legal framework Legal framework
Legal framework for the transaction is provided for by:
Legal framework for the transaction is provided for by:
Law Decree No. 351 of 25 September 2001 converted with amendments s into Law No. 410 of November 2001 and later amendments into Law No. 410 of November 2001 and later amendments
Decrees issued by AdD AdD, the Italian State Property Agency, identifying real , the Italian State Property Agency, identifying real estate properties of the Republic of Italy estate properties of the Republic of Italy
Decrees issued by the MEF in conjunction with the Ministry of Labour Labour and and Social Policies Social Policies
Law 130/99 (to the extent not otherwise excluded or amended)
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Legal framework (cont’d) Legal framework (cont’d)
The Issuer
The Issuer – S.C.I.P. S.C.I.P. Società Cartolarizzazione Imobili Pubblici Società Cartolarizzazione Imobili Pubblici S.r.l., an SPV S.r.l., an SPV established in 2001 with the sole objective of carrying out secu established in 2001 with the sole objective of carrying out securitization ritization transactions involving of real estate assets owned, transactions involving of real estate assets owned, inter inter alios alios, by the Republic by the Republic
The Assets
The Assets - SCIP 2 assets will be segregated from SCIP 1 assets and from SCIP 2 assets will be segregated from SCIP 1 assets and from the assets of future transactions executed using the same vehicl the assets of future transactions executed using the same vehicle
Transfer of the Assets
Transfer of the Assets
AdD has identified, by way of decree published in the Official Gaze has identified, by way of decree published in the Official Gazette, the tte, the real estate assets that can be transferred to SCIP real estate assets that can be transferred to SCIP
MEF will select the assets to be securitised out of the Agency Decree and ecree and such assets will be transferred to SCIP by way of Ministerial De such assets will be transferred to SCIP by way of Ministerial Decree cree
Transfer Price
Transfer Price - in consideration for the transfer of assets, SCIP will pay an n consideration for the transfer of assets, SCIP will pay an initial transfer price (I.T.P.) and a deferred transfer price(D. initial transfer price (I.T.P.) and a deferred transfer price(D.T.P.) T.P.)
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Tax Treatment Tax Treatment
Notes issued by SCIP will enjoy a Eurobond tax treatment (no wit
Notes issued by SCIP will enjoy a Eurobond tax treatment (no with holding tax h holding tax levied at source) levied at source)
No registration tax, stamp duty, mortgage tax or any other indir
No registration tax, stamp duty, mortgage tax or any other indirect tax will be ect tax will be levied on the Transaction levied on the Transaction
The segregated assets will be exempt from direct income tax
The segregated assets will be exempt from direct income tax
ICI (property tax) will be the liability of the relevant Asset M
ICI (property tax) will be the liability of the relevant Asset Manager anager
No withholding tax will be applicable on the interest earned on
No withholding tax will be applicable on the interest earned on monies in monies in SCIP’s SCIP’s collection and other current accounts collection and other current accounts
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New Mortgage New Mortgage Convenzione Convenzione
A new A new Convenzione Convenzione (framework agreement) will be signed by Asset Managers (framework agreement) will be signed by Asset Managers with banks committing to grant mortgages to SCIP 2 tenants at pr with banks committing to grant mortgages to SCIP 2 tenants at pre agreed e agreed spreads and terms for SCIP 2 spreads and terms for SCIP 2 Key Objectives Key Objectives
To establish a fast and simple access to the mortgage market fo
To establish a fast and simple access to the mortgage market for tenants r tenants
To avoid delays in the execution of mortgage contracts by establ
To avoid delays in the execution of mortgage contracts by establishing ishing standardized procedures for banks. standardized procedures for banks. Key Improvements: Key Improvements:
Banks will be selected on the best price for tenants after terri
Banks will be selected on the best price for tenants after territory coverage is tory coverage is ensured ensured
Standardized mortgage documentation content
Standardized mortgage documentation content
Coordination established and planned among tenants, Asset Manage
Coordination established and planned among tenants, Asset Managers, rs, mortgage banks and notaries mortgage banks and notaries
Mortgage will be granted within 30 days from the application dat
Mortgage will be granted within 30 days from the application date. e.
No application fee or additional cost
No application fee or additional cost
44
Performance of previous deals Performance of previous deals sponsored by the MEF sponsored by the MEF
Up to date, the MEF sponsored several benchmark securitisations: SCIP1, INPS, : SCIP1, INPS, Lotto, INAIL Lotto, INAIL
For the previous deals only triple A rated tranches tranches were issued, they were never put were issued, they were never put under negative outlook by rating agencies and consistently under negative outlook by rating agencies and consistently outperformed the relevant
base case base case
1: the amount he amount of
cash collect h collected a ed as of
31st O October
2002 is SCIP1: t 1: the amount he amount of
cash collect h collected a ed as of
31st O October
2002 is appr
1,760 million t lion that hat allow allowed t ed to t totally lly r releas lease t e the d he d appr
1,760 million t lion that hat allow allowed t ed to t totally lly r releas lease t e the d he debt ebt ebt ebt service r ice reserve.
If t the t he trend in collect end in collections ions is is conf confir irmed, w med, we ex ex service r ice reserve.
If t the t he trend in collect end in collections ions is is conf confir irmed, w med, we ex expect pect pect pect SCIP t to hav have r e receiv eceived appr ed approx. E
2,000 million in D million in December ecember 200 200 SCIP t to hav have r e receiv eceived appr ed approx. E
2,000 million in D million in December ecember 200 2002. 2. 2. 2. At t that hat dat date S e Series es 1 w 1 will be r ill be repaid in f epaid in full ll as as per per t the or he original iginal At t that hat dat date S e Series es 1 w 1 will be r ill be repaid in f epaid in full ll as as per per t the or he original iginal expect expected ed expect expected ed mat maturity and t and the r he remaining cas maining cash h will r ill repr epres esent ent alr already eady appr
mat maturity and t and the r he remaining cas maining cash h will r ill repr epres esent ent alr already eady appr
7% of 7% of 7% of the pr he principal of incipal of S Series es 2 expe 2 expect cted t ed to be r be repaid in D epaid in December ecember 2003 2003 the pr he principal of incipal of S Series es 2 expe 2 expect cted t ed to be r be repaid in D epaid in December ecember 2003 2003.
INAIL: cash collected over 110% of the bullet tranche tranche notional amount due in May 2003 notional amount due in May 2003
INPS: Series 3 was reimbursed one year prior to the expected maturity and the aturity and the excellent performance of the transaction allowed to consistently excellent performance of the transaction allowed to consistently increase the advance increase the advance level of the subsequent two Series level of the subsequent two Series
ater attached Appendix
46
Fund 60.6% Bank 28.2% Insurance 10.4% Other 0.8% Italy 52.8% France 18.2% Benelux 7.1% Spain 7.1% UK 6.1% RoE 4.2% Germany 1.9% Scandi 1.8% Asia 0.9%
Placement by Country
Senior Classes – distribution breakdown
Placement by Investor
reaching almost €3.0 bn
div ersified with orders coming f rom all Europe – Average ticket: €31 mm – Biggest single ticket: €370 mm
bn allocated – Funds average ticket: €35 mm – Funds biggest single ticket: €370 mm
in excess of €1.3 bn – Banks average ticket: €23 mm – Banks biggest single ticket: €239 mm
A well diversified order book: although Italy still represents the majority of the order book, the international component has significantly increased compared to previous transactions
47
Fund 65.0% Bank 22.0% Insurance 12.9% Other 0.1% Italy 58.5% Spain 14.4% Germany 6.3% UK 11.5% RoE 9.4% Placement of Subordinated Classes by Country
Subordinated Classes – distribution breakdown
Placement of Subordinated Classes by Investor type
€400 mm allocated
(Spain, UK and Germany in addition to Italy) with the Rest of Europe accounting for nearly €70 mm – Average ticket : €12 mm – Biggest single ticket: €91 mm
allocated – Funds average ticket: €17 mm – Funds biggest single ticket: €91 mm
– Banks average ticket: €6 mm – Banks biggest single ticket: €25 mm
Despite the unprecedented size of the tranches and the lack of comparables and benchmarks, very large interest from investors on the subordinated classes
48
Thursday 5 December 2002
“SCIP-2 beats all records”
“More than 150 investors have bought the Italy sponsored transaction”
49
Thursday 5 December 2002
50
www.eurow eek .comItaly returns to A BS mart with jumbo Eu6.6bn real estate deal The Republic of Italy this week relaunched itself in the asset backed market with a Eu6.6bn equivalent securitisation of real estate assets. Lead managed by A BN A mro, Banca Nazionale del Lavoro, Citigroup/SSSB and JP Morgan, Società Cartolarizzazione Imm-obili Pubblici Srl (SCIP), which securitises residential and commercial real estate disposal proceeds, is a groundbreaking deal for the republic. A t Eu6.6bn, it is also one of the largest continental European securitisations yet, designed to establish a new, liquid benchmark for Italian government A BS paper. It is also the first time Italy has issued across the capital structure, with two subordinated tranches crafted to meet new accounting criteria announced by EU statistics arm Eurostat in May. The SPV issued some Eu858m of double-A and Eu536m of single-A bonds, meeting the 85% advance rate rule f or Eurostat’s new criteria (see EuroWeek 779). The new framework also forced Italy to restate its debt/GDP ratio, bringing both the prev ious lottery and real estate securitisations back on balance sheet, as well as part of the INPS and INAIL securitisations. After a quarter of heavy issuance in the ABS market and so close to year end, the deal was a test of inv estor demand, particularly in the lower tranches. The final pricing reflects the deal’s almost unprecedented size as well as the flurry of issuance in recent weeks. “The junior tranches were a big jump for the republic in terms of how it is perceived by the market,” said Enrico Cantarelli, a member of the Consiglio degli Esperti at the ministry of economy and finance in Rome. “We needed to pay a premium to that which w as logically required in order to bring in all the investors. But we have created the only piece of liquid paper at those rating levels in the asset class, and we expect the bonds to tighten in secondary trading.” A fter being formally announced in mid-November, the bonds were swiftly marketed across Europe in euros and dollars. “There was barely a country in western Europe we didn’t visit,” said James St Johnston, co-head of European syndicate at ABN Amro in London. “We showed the deal to traditional A BS accounts, as well as non-A BS buyers, who saw the deal as a good opportunity for a healthy pick-up over Italian government CCTs.” “The Italian government and the overall inv estor base were keen to have large, liquid benchmark tranches.” The deal w as sold to over 150 inv estors, with around 40% of the bonds going to Italian accounts. The remaining paper w as sold across Europe, with a small participation from Asian inv estors. The leads reported oversubscriptions on the senior two short dated
pricing was in line with our expectations, with the Class ‘A1’ and ‘A2’ tranches ending up at the tight end of the original expected lev els. All the triple-A bonds are trading above par in the secondary market.” Price guidance moved out on the subordinated tranches, both of which fell at the wide end of price talk. “Despite the backdrop of Eu20bn-Eu30bn in supply we got the deal done at levels well within expectations,” said Bradford Craighead, head of structured finance syndicate at JP Morgan in London. “Double-A tranches are typically sized at Eu50m–Eu100m in this market. Doing over Eu800m is a great achievement.” While the disposal process pools part commercial assets — around 29% — the deal benefits f rom the indirect backing of the Italian government, from which further real estate deals are expected next year. The deal is not formally guaranteed, in compliance with Eurostat criteria for off balance sheet treatment. “This is a deal that cannot default,” said an Italian investor. “And the spreads on the ‘B’ and ‘C’ classes are unmissable. We expect the bonds to widen in secondary trading, and hope to try and pick some up in the new year.” The junior tranches were bid and offered at par in the secondary market. The latest SCIP deal follows the broad structure
last deal underperformed the arrangers’ base case scenarios by 20% in terms of cumulative collections. Along with a more standardised documentation, the number
direct borrowing, the finance ministry’s Cantarelli emphasised the value of the exercise for the state. “The real estate represents negative carry after considering the
e can put them to better use and reduce the country’s public debt burden.”
Friday 6 December 2002
51 Republic of Italy smashes A BS record The Republic of Italy rewrote the record books with the largest ever European A BS last week. SCIP 2 through A BN A MRO, BNL, JP Morgan and SSSB securitised a E7.8bn portfolio, of which E6.637bn of bonds were sold. This issue sets new benchmarks at each individual tranche level. However, the Treasury had a strict timeframe to get the deal done, and the lead managers were presented with the problem of selling an unprecedented amount of bonds, especially subordinated, in an awkward market in a short period of time. Initially the leads w ere toying with the idea of including US dollar tranches to increase distribution capabilities but the investor response was one of apathy. Investors said that, if the plan had been to boost distribution by adding US dollar tranches, it should have been opened up to the US market. The leads, however, explained that the European investor base w as familiar with the Italian Treasury’s securitisation programme and conducting US roadshows to explain the credit story across the Atlantic w
the already fast-evaporating time schedule. As a result, the US dollar pieces were scrapped and the euro tranches were increased to compensate. Reducing the deal to remove the US dollar bonds w as out of the question. The originator w anted to shift the maximum amount off-balance sheet bef ore year-end. The Triple A tranches, as expected, pulled in decent orders, but the concern was always ov er how the junior pieces w
respectively, w ere originally talked at plus 55bp–65bp and 90bp–low
65bp and 117bp. There is a finite Single A investor base and asking it to take up such large amounts of paper was seen to push things a little, but other buyers did move down the curve to exploit the pick-up. A JP M
issue, but some investors thought an extra 20bp on the Single A would have been more appropriate given market conditions. One investor said that he saw relativ e value in the Double A tranche, as at a spread of 65bp it offered a significant pick-up over CCT s (Italian Treasury bonds). The leads refused to disclose the exact size of the order book, but both sub tranches w ere not fully covered at launch. The E1.5bn 1.41-year and E2bn 2.41-year Triple A bonds were
Investors estimated that around E6bn was fully sold at the time of pricing, and in the current environment that was no mean feat. It tested the skills of the arrangers to the limit. A t the end of the day, all parties were satisfied with the execution. Sources in the deal pointed to many distractions during the marketing phase, saying that they had to keep investors’ focus. On the other hand, how ever, bankers aw ay from the above f our underwriters, attempting to bring their own deals, saw SCIP as the biggest distraction of them all. A short, intense roadshow was conducted in 12 centres across Europe. In total 150 investors bought into SCIP 2. The main types were funds, asset managers, banks, insurance companies and some corporates. Over 40% of the bonds were placed in Italy and the rest across Continental Europe and the UK. “The co-ordination between the arrangers and the Ministry was unprecedented: essentially it was a single entity doing the deal,” said one arranger. “We are very grateful to the subscribers and arrangers . . . Next year we plan to sell a similar amount of real estate,” said Domenico Siniscalco, director general of the M inistry of Economy and Finance. Siniscalco said he was not sure whether all the real estate sold next year w
hether involved in the transaction
among the outperformers, and a similar display can be expected f rom this one on the basis of its liquidity. Tranches from SCIP 1 and the lottery ABS are about to redeem and should f ree up some more investor credit lines.
Friday 6 December 2002
53
Contact List
ABN AMRO ABN AMRO BNL BNL JPMORGAN JPMORGAN SSSB SSSB SYNDICATE SYNDICATE SYNDICATE SYNDICATE SYNDICATE SYNDICATE SYNDICATE SYNDICATE
Rayzor A.
D’Apuzzo
P. P.Apostolicas Apostolicas/J. Mann /J. Mann
Fax.+ 39 06 4788 8111 Fax.+ 39 06 4788 8111
STRUCTURING STRUCTURING STRUCTURING STRUCTURING STRUCTURING STRUCTURING STRUCTURING STRUCTURING Luca Luca Silla Silla Eugenio Cerioni Eugenio Cerioni Francesco De Francesco De Bartolo Bartolo Mario Mario Cortesi Cortesi
Fax.+44 207 986 4703 Fax.+44 207 986 4703 Moshe Fellah Moshe Fellah Giada Sonego Giada Sonego Cristina Perez Cristina Perez Marco Marco Penna Penna
6494 6494
Fax.+39 06 4788 8111 Fax.+39 06 4788 8111
Manuela Formica Manuela Formica Daniela Daniela Fredella Fredella Massimiliano Ruggieri Massimiliano Ruggieri Elif Germirli Elif Germirli
Tel.+39 06 4702 6506 Tel.+39 06 4702 6506
54
Disclaimer
The securities discussed herein have not been and w ill not be re The securities discussed herein have not been and w ill not be registered w ith the U.S. Securities and Exchange Commission. Such gistered w ith the U.S. Securities and Exchange Commission. Such securities may not be offered or sold, securities may not be offered or sold, and this document may not be disseminated, in the United States and this document may not be disseminated, in the United States or to any U.S. person, except in connection w ith (1) a transacti
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periods show n in the Statistical Informati
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