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Healthcare ABS: Italian regions’ ill-health exposed

Eurostat’s ruling that healthcare securitizations will be treated as on-balance-sheet debt has forced the Tesoro to concede that the country’s constitution actually prohibits them.

The revelation that rescheduled long-term debt with implied government support contravenes Article 119 of the constitution of the Republic of Italy – which states that local public entities are allowed to incur debt only if the debt is to finance investments – invalidates the principle of delegazion de pagamento (payment delegation). This concept, whereby the regional government becomes the direct obligor of the receivable which is then rescheduled, has been the basis on which securitization has papered over the cracks in the decentralization of healthcare provision in Italy [see S&P knocks Italian regionals, Euromoney October 2006].

As previously reported, Standard & Poor’s last year highlighted the plight of the local healthcare suppliers in the regions of Campania, Abruzzo and Lazio, which routinely face protracted delays before getting paid out of central government remittances. The agency affirmed Campania before Christmas and downgraded Abruzzo but the jury is still out on Lazio.

Hard deadline

This means that Campania’s planned public health receivables securitization, a deal of undisclosed size jointly mandated to Calyon, Credit Suisse and Lehman, will safely make it to market by March 31, the expiry date imposed by Italy on deals that require its debt delegation.

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