The possible implementation of a fast-track registration procedure for placement of asset-backed securities in Peru

Paul Castritius
Rodrigo, Elias & Medrano Abogados, Lima
pcastritius@estudiorodrigo.com

The cost of financing has increased for Peruvian companies, with the increased perception of risk for the development of economic activities in the country.

This requires a reaction from the regulatory authorities for finance systems, such as the Peruvian Superintendency of the Securities Market (SMV), to search for maximum efficiency in the regulatory regimes that companies must comply with to access financing.

Let us take the example of asset securitisation, an alternative mechanism to traditional financing (in which securities are backed by the general risk of the issuer). Companies use this for structuring securities issuances in which risk is based exclusively on specific assets, potentially allowing them to access different markets in more favourable conditions.

Peruvian legislation has implemented specialised markets such as the Institutional Investors Market (MII) or the Alternative Securities Market (MAV). These markets allow issuers to place their securities and obtain financing with lower regulatory requirements and faster registration times than the ‘general regime’ applicable to public offerings, therefore enabling more agile and lower-cost placements. However, these markets are not available to companies that want to structure and place asset-backed securities on them.

The MII is a market in which only ‘typical’ institutional investors (such as pension funds, insurance companies, and other entities of the financial system and the capital market), as well as non-traditional institutional investors, such as public or private funds, companies and individuals, that meet certain minimum equity or portfolio requirements, may invest.

The main advantages of the legal regime applicable to this market compared to the ‘general regime’ is that:

• the review of the SMV of the registration procedure is limited to verifying the filing of the required documentation (ie, it would not analyse the content);
• the information of the transaction is not open to the public;
• only one risk rating is required instead of two; and
• that issuers are subject to lower post-registration reporting requirements.

The MAV, for its part, is a market open to any investor, in which only companies with income derived from the sale of goods or the provision of services for an amount below PEN350m (approximately $87.5m at an exchange rate of four Peruvian soles per US dollar) can participate as issuers. The main advantages of this market consist of:

• shorter registration periods;
• only one risk rating is required instead of two;
• pre-established forms are used for the preparation of the documentation required for the registration;
• fewer post-registration information requirements;
• a less strict sanctioning regime; and
• reduced regulatory fees.

Unfortunately, a company that wants to use certain assets to structure an issuance of securities backed only by those assets will not be able to access the MII or the MAV, to the extent that the regulations that govern them do not foresee that asset-backed securities may be placed on those markets.

Together with the Association of Securitization Companies – a union of the entities that serve as trustees in the trusts that serve as vehicles for the issuance of asset-backed securities – we have prepared and presented the SMV with a project to modify the regulations of the MII so that said market would be open for the placement of asset-backed securities. The same path is planned with respect to the regulation of the MAV.

The first proposal is on the SMV’s regulatory agenda for this year and a positive result is foreseen. However, it is also expected that the amendment of the MAV regulation to obtain the same result will also be included in the SMV’s regulatory agenda in the short term.

This will undoubtedly make an important contribution to granting more financing options to companies, as well as increasing the investment instrument option for market participants.