In April 2008, the Luxembourg Commission for the Supervision of the Financial Sector (the ”CSSF”) published its report for 2007, in which it clarified the legal framework applying to securitization vehicles that are governed by the law of 22 March 2004. In particular, the CSSF addressed the main following issues:

  • A securitization vehicle may grant loans: third parties must set up the loans and the documentation of the issuance must mention the assets whereby the repayment of the loans relies on or the criteria as for the borrowers’ selection.
  • A securitization vehicle may securitize revolving loans or loans that are not yet fully drawn down. However, a certain number of conditions need to be fulfilled. Indeed, a pre-determined framework for those loans has to be established and a securitization vehicle has no discretion when selecting or choosing the borrowers or the terms of the loans.
  • A securitization vehicle may also securitize commodities but the purpose of the acquisition of such commodities by a securitization vehicle is to provide financing. Furthermore, such commodities create collateral in order to secure the repayment of the obligations of the entity to which the financing is provided and entail cash flows for the benefit of investors.
  • A securitization vehicle may also borrow for leverage purposes in order to cover temporary shortfalls or during the warehousing period as long as the issuance of securities provides financing to a securitization vehicle.
  • A securitization vehicle may securitize shares or units in UCIs, limited partnerships, hedge funds or other companies that hold the securitized risks provided that a securitization vehicle carries out any management activities in the entities to which it has direct or indirect participation. Lastly, a securitization must not provide services of any kind to such entities.