Public sector securitization: Esoteric risks tax investor appetite
More challenging asset classes will require a different approach to Italian public sector risk.
Italy’s public sector securitization programme has long been a source of sovereign or sub-sovereign risk for ABS investors. Some €44 billion has been issued so far – half of which is still outstanding. But as more esoteric and illiquid assets come to the table, private, unrated deals will become increasingly important in repackaging these new types of risks.
There is a systemic imbalance in Italy’s healthcare and tax collection sectors that has already prompted a handful of public ABS deals (such as the FL Finance, Atlantide and Cartesio healthcare deals and Euterpe Finance, which was backed by tax credit receivables owed to Ferrovie dello Stato, the state railway system). The Region of Abruzzo was in the market with a €327.4 million healthcare deal, D’Annunzio, in April and a further deal from the Region of Lazio is imminent. But this is the tip of the iceberg: Italy now has a national healthcare indebtedness of €53 billion and a desperate need to monetize huge volumes of illiquid receivables to avoid collection costs. Crucial to the healthcare receivables deals that have taken place so far is debt delegation – whereby the region has assumed the local healthcare authority (ASL)’s obligation to pay.