Securitization in Lebanon
IN LEBANON By Rami Alameh
Lebanon saw its legal framework put in place by law No 705 of December 9, 2005
called “Asset securitization Law” The purpose of this Law is to define the
legal framework that governs asset securitization.
Securitization is the
financial process resulting in the assignment of assets by the Originator to a
Legal Entity established for this purpose according to the provisions of this
Law, with or without the assistance of a financial intermediary.
In plain English, you
can benefit from the assets you have on your balance sheet to raise capital by
issuing securities that are backed by such assets and any revenue they already
generate. This process can help your company raise capital why keeping the same
shareholder structure and would enable an implementation of a growth strategy
that would generate further revenue to the firm.
DO WE ASSIGN ASSETS?
assigns any receivable just by signing a transfer deed that stands for a
contract and enumerates these receivables. This transfer deed is handed to the
Manager and the Custodian, provided each of them signs an acknowledgement of
transfers by law the ownership of the definitively assigned receivable to the
Fund’s financial estate.
receivable is removed from the Originator’s financial estate and from the
assets item of its balance sheet. The Originator may grant the assignee, in
total or in part, the right of recourse, provided this is clearly indicated in
the Originator’s financial statements.
DEFINITIONS TO LOOK AT WHEN READING LAW No 705/2005.
Originator Any Lebanese or foreign, natural
or legal, person from the persons of public or private law, wishing to assign
assets owned by the said person through a securitization process.
Assets: Any financial property, tangible
or intangible, movable or immovable that is part of the Originator’s financial
estate, including receivables.
Receivables Any type of debt due to the
Originator by natural or legal persons.
Fund Any securitization mutual Fund.
Manager Any company that is entrusted
with the management of the Fund and meets th conditions stipulated by this Law.
Custodian The institution with which the
Fund assets are deposited.
mutual Funds specified in Article 3 et seq. of this Law, and other legal
entities accepted by the Banque du Liban for this purpose, pursuant to BDL
regulatory decisions that determine the features and legal status of these entities,
whether governed by Lebanese or foreign laws.
Expenses Total expenses
incurred for establishing and managing the Fund or the Legal Entity, and for
managing the financial estate of any of them, in accordance with their
respective by-laws. The Fund’s or Legal Entity’s Revenues Revenues which,
regardless of their nature, result from assets assigned through securitization.
securitization process in which shares and debentures are not marketed for
subscription by the public. In this case, marketing and subscription are
restricted to banks and financial institutions authorized by the Banque du
Liban; institutions governed by insurance and reinsurance legislation; the
Banque du Liban; and any type of institution whose specifications are defined
by the BDL, through its regulatory decisions.
Enhancement Any additional
guarantee submitted in favor of the Fund or any other Legal Entity. Additional
1- Any assignment of
assets whose value exceeds that of the shares and/or debentures issued by
either the Fund or the Legal Entity.
2- Any surety,
guarantee, insurance policy or the like. Fund-backing transactions may include
debentures issued by the Fund or the Legal Entity either for:
a- backing the financial
estate or improving the guarantee concerning the shares and/or debentures
issued by the Fund or the Legal Entity; or
b- improving the
credit rating of these shares and/or debentures.
enhancement may be provided by the Originator or by a third party. It is an
integral part of the financial estate of the Fund or the Legal Entity.
Securitization Fund Any securitization mutual Fund complying with
the provisions of Islamic Law (Sharia).
Securitization Sukuks Any
Sukuks of equal value that are issued and traded in accordance with the
provisions of Islamic Law, and that represent joint shares in the ownership of
assets, rights or services.