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Matheson advises on USD 1 billion Trade MAPS Series 2013-1 Notes issuance
Matheson recently advised on the issuance of the Trade MAPS Series 2013-1 Notes, a first of its kind multi-bank, multi-jurisdiction trade finance asset securitisation relating to import and export activities, consisting of 7,336 loans from 175 obligors.
The transaction was developed jointly by Citi and Santander and structured by Morgan Stanley. The transaction used several Irish special purpose vehicles to enable both Citi and Santander branches domiciled in Asia, Latin America, Europe, the Middle East and North America to sell trade finance assets, and acquire funding from the capital markets.
John Ahearn, Global Head of Trade at Citi, commented, “The program is designed to benefit the broader industry by establishing an origination and funding platform for trade banks with global market positions, creating a highly diversified and granular pool of assets ultimately translating into access to a new and wider investor base.”
Fabio José Fagundes, who led the Trade MAPS initiative for Santander's Global Trade Finance commented, “This is a transformational step for the future of trade finance. Through well-coordinated teamwork between co-arrangers, law firms and several control functions within our organizations we have invested considerably in a platform that will allow a sustainable future for the financing of global trade flows.”
Christian Donagh (Partner, Structured Finance) led the Matheson team advising on the transaction, which included Gerry Thornton (Partner, Tax), Kevin Smith (Associate, Tax) and Richard Kelly (Associate, Structured Finance). Christian commented, “This innovative deal demonstrates that Ireland is a leading jurisdiction through which securitisation transactions can be structured. The transaction is a timely reminder of how securitisations can provide funding for banks to lend to SMEs and it is particularly pleasing that Ireland plays such a central role in this global SME funding platform.”
Structure of the transaction
In the first ever trade finance securitisation involving more than one bank in more than one country, an Irish vehicle called Trade MAPS 1 Limited issued USD 1 billion of three-year rated notes, backed by trade finance assets originated by the two banks.
Historically, trade finance asset securitisations have been backed by a synthetic transfer of risk using derivatives, rather than through acquisition of cash assets, in order to avoid potential difficulties caused by the laws of the large number of jurisdictions involved. The Trade MAPS transaction addressed this issue by acquiring the assets through five “Asset Purchasing Entities”, established in three jurisdictions. Trade finance assets were sold to the Asset Purchasing Entity in the most advantageous jurisdiction, having regard to the laws governing the relevant assets. T
he Asset Purchasing Entities then issued profit-linked debt securities to Trade MAPS 1 Limited, passing-through the return on the trade finance assets. Trade MAPS 1 Limited, in turn, issued the Series 2013-1 Notes to investors in the capital markets.
Ireland as an SPV jurisdiction
Following extensive due diligence, Ireland’s leading infrastructure within the structured finance industry saw it chosen not only as the jurisdiction in which the funding entity, Trade MAPS 1 Limited, was incorporated, but also as the only European jurisdiction in which Asset Purchasing Entities were incorporated. Key in this decision was Ireland’s extensive tax treaty network (Ireland currently has double taxation agreements with 70 countries); the expertise and experience within Ireland in advising, administering and auditing complex structured finance transactions; and the favourable offering and distribution characteristics of debt securities issued by Irish companies.
Adding to Ireland’s on-going reputation as the jurisdiction of choice for the establishment of securitisation vehicles is the Irish Government’s on-going support for the Irish debt securities industry. In the Government’s recently published “Medium-Term Economic Strategy - 2014 – 2020”, the Government stated: “Europe’s lack of a robust securitisation market is a key constraint on credit flows. Reigniting this market will require action at both the national and European level. It is important that Ireland actively promotes initiatives by EU institutions in supporting SME securitisations as this can play a key role in kick-starting these markets to generate funding sources for banks… [T]here is an onus on government and the national regulator to proactively work with industry to develop concrete measures that will support the development of quality, simple and transparent securitisations.”
Ireland’s prominent role in the Trade MAPS transaction demonstrates that it is well placed to facilitate future SME securitisations.