Decree-Law 453/99 of 5 November 1999 (the "Securitisation Law") allowed the sale of receivables to be transformed into securities, with the purpose of being publicly or privately placed in the domestic and international markets. Although until the approval of this bill, securitisation of Portuguese receivables could be achieved, it was generally understood that the Securities Commission (Comiss„o de Mercado de Valores Mobili·rios - "CMVM") would not allow the issue and public placement in Portugal of the securities issued by the purchaser of the Portuguese receivables.
However, the new bill has not increased the market's interest in the securitisation of Portuguese receivables as it had been expected, as a result of stringent requirements for the incorporation of securitisation vehicles. In response to this, the Government has recently enacted Decree-Law 82/2002 of 5 April 2002, amending the Securitisation Law in order to create the necessary conditions for a competitive securitisation market.
This paper aims to describe the conditions under which it is now possible to securitise Portuguese receivables under Portuguese Law. However, the information and expressions of opinion this document contains are not intended to be a comprehensive study and should not be treated as a substitute for specific advice concerning individual situations.
For the purposes of our analysis, we shall assume that the parties incorporate a one-tier structure, whereby the Portuguese originator sells his receivables to an offshore or inshore vehicle, without the intermediation of a vehicle that acquires the receivables in order to sell them to the issuer of the securities.
Transfer of Receivables
Forms of transfer
In general, Portuguese law allows the transfer of debts under four possible forms:
the assignment of contracts (cess„o da posiÁ„o contratual);
the assignment of debts/credits (cess„o de crÈditos);
the subrogation (subrogaÁ„o); and
the novation (novaÁ„o).
B. Assignment of contracts
An assignment of contract (cess„o de posiÁ„o contratual) is a contract whereby the assignor (cedente) transfers his rights and obligations under a contract to the assignee (cession·rio), which assumes the same position under the contract as the assignor. Such assignment requires the prior consent of the counterparty to the original contract (cedido). When the contract, which is the object of the assignment, provides that no consent is required for a future assignment, notification to the cedido will be required to perfect the assignment, who otherwise will continue to perform his obligations towards the assignor instead of the assignee.
The assignment of contracts would not work in common securitisation structures, as it requires the notification or the approval of the debtor in order to be effective. This would render very difficult the assignment procedure and would not ensure that certain debtors might not oppose to the transfer of his debt to a third party.
Another disadvantage of using this form of assignment is that, by taking the position of the originator in the contract, the purchaser will be subject to the same set of rules as the originator. Therefore, if the originator is a regulated entity, such as a bank or an insurance company, the purchaser will have to hold a license to conduct the same business in Portugal.
However, it may be advisable when the contracts that are being assigned involve large sums and the parties are in position to obtain the required consent or notification. For instance, in the refinancing of large projects, which involve a government concession, such as a bridge or highways, the assignment of the concession contract would allow the transfer of the future receivables, in the form of tolls or shadow tolls, to the purchaser.
C. Assignment of debts
The assignment of debts (cess„o de crÈditos) involves a bilateral agreement between the originator and the purchaser (i.e. the securitisation vehicle), whereby only the assignor's debts (cedente) arising under certain contracts are transferred to the assignee (cession·rio). The obligations of the assignor under the contract are not transferred and the validity of the assignment does not require consent or notification of the debtor (cedido). Usually the originator will remain as collecting agent, so that the purchaser will not need to notify the debtor unless he chooses to, i.e. to ensure that the debtor pays directly...