Securitisation in Portugal: navigating new waters

Vincent Keaveny of the International Securities Group at Norton Rose says that the introduction of a new legal framework for securitisations, Deutsche Bank’s recent innovative transactions, the advent of the euro and greater international investor understanding of domestic financial institutions could herald a new era in securitisation activity in Portugal.

Vincent Keaveny International Securities Group Norton Rose +44 (0) 20 7283 6000

1999: the voyage out

For several years Portugal has been a jurisdiction where, in the eyes of many prospective deal arrangers, the obvious potential of the market was outweighed by the number of difficulties which any successful deal would need to overcome. These included uncertainty regarding the imposition of a withholding tax on interest payments to non-Portuguese entities, legal difficulties with respect to the registration and perfection of ownership interests and the costs and difficulties in funding (and hedging) in Portuguese escudos. However, 1999 saw the opening-up of the Portuguese market with a series of issues, almost all of which were arranged and lead managed by Deutsche Bank AG. This development was initiated by the creation of a transaction structure which overcame a number of the obstacles that had proved off-putting in the past and which was regarded as robust and acceptable by leading Portuguese legal and tax advisers. At the same time, the introduction of the euro significantly eased the funding difficulties previously associated with transactions involving escudo-denominated assets. The growth in international investors’ recognition and understanding of the leading Portuguese financial institutions had also increased as more of those institutions issued debt in the international capital markets, registered with the US Securities Exchange Commission or acquired businesses outside Portugal.