Mini-Bond-Backed Securities: A Breakthrough for Italian SMEs?

Abstract

This article offers an overview on the recent Italian regulation of nongranular securitization. A specific legal framework for mini-bonds enables small enterprises to issue and list bonds at a reduced cost and under an advantageous fiscal regime. It incentivizes securitization by improving investors’ insulation against a number of operational risks. The article provides a technical summary of the Elite Basket Bond, the first securitization of diversified mini-bonds, which has the potential to become a benchmark for other similar transactions in terms of pool, issuer characteristics, and liability structure. Recent innovations represent a pivotal effort to make investments in small and medium-sized enterprises (SMEs) interesting for large funds and institutional players and open interesting prospects for investors. Going forward, mini-bond securitizations may represent a structured way to invest in SMEs, thereby enhancing SME access to finance. The Elite Basket Bond is arguably an instrument that is scalable and might be replicated elsewhere in Europe.

TOPICS: Fixed income and structured finance, international investing, risk management, legal/regulatory/public policy