AIFMD and repackaging

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“Securitisation special purpose entity”

There is a bit of a reverse rabbithole here, but to see that a repackaging SPV is out of scope for AIFMD you start with the concept of “securitisation” as defined in ECB/2013/40 as follows:

“Securitisation” means a transaction or scheme whereby an entity that is separate from the originator or insurance or reinsurance undertaking and is created for or serves the purpose of the transaction or scheme issues financing instruments to investors, and one or more of the following takes place:

(a) an asset or pool of assets, or part thereof, is transferred to an entity that is separate from the originator and is created for or serves the purpose of the transaction or scheme, either by the transfer of legal title or beneficial interest of those assets from the originator or through sub-participation;

(b) the credit risk of an asset or pool of assets, or part thereof, is transferred through the use of credit derivatives, guarantees or any similar mechanism to the investors in the financing instruments issued by an entity that is separate from the originator and is created for or serves the purpose of the transaction or scheme;

(c) insurance risks are transferred from an insurance or reinsurance undertaking to a separate entity that is created for or serves the purpose of the transaction or scheme, whereby the entity fully funds its exposure to such risks through the issuance of financing instruments, and the repayment rights of the investors in those financing instruments are subordinated to the reinsurance obligations of the entity;

Where such financing instruments are issued, they do not represent the payment obligations of the originator, or insurance or reinsurance undertaking;

Key is the expression “financing instrument”, which is defined nearby as “debt securities, other debt instruments, securitisation fund units, and/or financial derivatives” — that is do say, indebtedness, not equity ownership.

Right. Now over to the AIFMD, where we see, in Article 3, that the directive does not apply to “securitisation special purpose entities”, being entities whose sole purpose is to carry on securitisations within the meaning of [the securitisation regulations of ECB/2013/40] and other activities which are appropriate to accomplish that purpose”.

In other words, debt securities, properly called, are out of scope.

There is probably another way they could have got to the same place — by categorising “collective investment undertakings” as those conferring equity participations or ownership interests in the asset portfolio owned by the the SPV, rather than debt interests — although one can rather blur that line with minimal capital return total return notes (nominal: 100. Guaranteed repayment amount (subject ~ cough ~ to limited recourse) if that is your bag.