LONDON, July 22 (IFR) - Eight Italian water utilities in the
Veneto region have side- stepped the bank loan market by pooling
minibonds they have issued and using them as collateral for an
The special purpose vehicle used for the transaction is
called Viveracqua Hydrobond 1, which issued EUR150m of 20-year
notes with a coupon of 3.9%, backed by the minibonds, to provide
the underlying utilities with long-term funding to develop
Policymakers and market participants have been looking at
ways to boost lending to the SME market across Europe, and this
could provide a useful template.
The transaction takes advantage of modifications to the
Italian securitisation law and also to the mid-cap financing
rules. The former permit a greater range of assets to back
bonds, while the latter allow smaller entities to issue
minibonds within the same regime as corporate transactions
listed on the stock exchange. The changes also allowed insurers
and pension funds to invest in such securities.
The EIB bought the majority of the bonds, which were lead
arranged by Finanziaria Internazionale and co-arranged by Veneto
Sviluppo. The rest went to banks and pension funds.
The transaction is not rated, but the eight utilities have
unsolicited ratings from Italian rating agency CRIF.
The bond is credit enhanced through two loss-absorbing
mechanisms for a total of 30m, or 20% of the deal size.
The first is a 6m cash reserve provided by the financing
arm of the Veneto region, and the second loss piece comes from
the utilities leaving a combined total of 24m in the structure
from the proceeds of their minibonds. These minibonds
cross-collateralise the structure, covering for any potential
The bond follows a scheduled amortisation plan, commencing
in year two of its 20-year life.
The participating utilities are Acque del Basso Livenza,
Acque del Chiampo, Acque Vicentine, Alto Vicentino Servizi,
Azienda Servizi Integrati, BIM Gestione Servizi Pubblici, Centro
Veneto Servizi and Energia Territorio Risorse Ambientali - ETRA.
(Reporting by Anil Mayre; Editing by Philip Wright)