Royal Decree 579/2014 developing aspects of the Law on Support for Entrepreneurs and their Internationalization regarding internationalization bonds and debentures

OFFICIAL STATE GAZETTE No. 172 Wednesday, July 16, 2014 Sec. I. Page 56121 I. GENERAL PROVISIONS MINISTRY OF ECONOMY AND COMPETITIVENESS 7533 Royal Decree 579/2014, of July 4, developing certain aspects of Law 14/2013, of September 27, on support for entrepreneurs and their internationalization, in matters of internationalization debentures and bonds.

Since the outbreak of the financial crisis in the summer of 2007, Spain has experienced a considerable contraction in economic growth, accompanied and reinforced by a reduction in bank credit. The fall in the level of economic activity has been partially counteracted by the good performance of external demand. Thus, for example, in 2012, the contribution of the external sector to the growth of gross domestic product was 2.5 percentage points.

Despite these positive figures, companies conducting business in the external market are not immune to the credit restrictions affecting the national economy as a whole. For this reason, Royal Decree-Law 20/2012, of July 13, on measures to guarantee budgetary stability and promote competitiveness, already modified Law 44/2002, of November 22, on Measures for the Reform of the Financial System, with the aim of providing for the creation of a new bank financing mechanism, the internationalization debenture.

Internationalization debentures, similar to mortgage and territorial debentures, are fixed-income instruments whose issuance is secured by a portfolio of loans and credits previously granted by the issuer. In the particular case of internationalization debentures, said loans and credits must be linked to the financing of export contracts or the internationalization of companies that meet certain credit quality requirements.

For its part, Law 14/2013, of September 27, on support for entrepreneurs and their internationalization, replaces the legal framework for internationalization debentures established in Royal Decree-Law 20/2012, of July 13, by redefining the eligible assets to guarantee territorial debentures and internationalization debentures. In addition, the aforementioned Law 14/2013, of September 27, provides for the creation of a new instrument, the internationalization bond.

Internationalization bonds, unlike internationalization debentures, are not guaranteed by the entire portfolio of eligible loans and credits but only by those that have been assigned to the issuance by public deed. This grants the issuer the ability to adapt its issuances to investor preferences.

Internationalization debentures and bonds therefore constitute a mechanism for refinancing loans and credits linked to the financing of export contracts or the internationalization of companies. With this, the aim is, on the one hand, to facilitate access to financing for entities and, on the other, for these facilities to ultimately result in better financing conditions for exporting companies or those undergoing internationalization processes.

To achieve the full operability of internationalization debentures and bonds, it is necessary to complete the regulatory development of the aspects regarding internationalization debentures and bonds contained in Law 14/2013, of September 27. For this reason, this royal decree rests on three fundamental pillars: the regulations governing issuances, the provisions governing transactions on these securities in the secondary market, and the supervisory competencies of the National Securities Market Commission (CNMV) and the Bank of Spain.

Regarding issuance regulations, the royal decree establishes the information that internationalization debenture and bond issuances must contain, the method for calculating maximum issuance limits, and the mechanisms to restore these limits when they are exceeded. Likewise, in order to offer a faithful and transparent image of the guarantees offered by internationalization debentures and bonds, entities must register the assets that guarantee their issuances.

Regarding the functioning of the secondary market for internationalization debentures and bonds, without prejudice to the provisions established in Law 24/1988, of July 28, on the Securities Market, the royal decree places special emphasis on the regulation of transactions that the issuer can perform on its own internationalization debentures and bonds.

Finally, regarding supervision, the Bank of Spain will be responsible for supervising the conditions required for the collateral assets of internationalization debentures and bonds, while the National Securities Market Commission will supervise matters related to public offers of internationalization debentures and bonds and the development of these securities in the secondary market.

Alongside the legal regime for internationalization debentures and bonds, the sole additional provision, in development of Article 13.Eighth of Law 44/2002, of November 22, on Measures for the Reform of the Financial System, provides for an accounting register for the assets guaranteeing territorial debentures similar to that established for internationalization debentures and bonds, the preparation of which is entrusted to the Bank of Spain.

In virtue thereof, upon the proposal of the Minister of Economy and Competitiveness, in agreement with the Council of State and after deliberation by the Council of Ministers in its meeting on July 4, 2014,

I HEREBY ORDER:

CHAPTER I General Provisions

Article 1. Purpose. This royal decree aims to carry out the regulatory development of Law 14/2013, of September 27, on support for entrepreneurs and their internationalization, with regard to the internationalization debentures and bonds regulated in its Article 34.

Article 2. Issuers of internationalization debentures and bonds. Entities mentioned in paragraph 1 of Article 34.1 of said law may issue fixed-income securities in series or individually with the designation of "Internationalization Debentures" or "Internationalization Bonds," whose capital and interest will be especially guaranteed by the assets contemplated in Articles 34.6 and 8 of Law 14/2013, of September 27.

CHAPTER II Issuance of Internationalization Debentures and Bonds

Article 3. Information that internationalization debentures must contain.

1. The titles of internationalization debentures shall contain, at least, the following data: a) Specific designation and indication of their governing law. b) The expression of whether they are registered, to order, or bearer, and, if applicable, the name of the holder or the person to whose order they are payable. In the absence of express qualification, they shall be deemed issued as bearer instruments. c) Their nominal value and the value of premiums, if any. d) The term and form of capital amortization. e) The interest they accrue and their due dates. f) The option, regarding the form of payment, allowed by Article 11. g) The expression of whether the debenture is unique or belongs to a series, and in the latter case, the number of the title and the number or letter of the series, if there are several. h) The date of issuance. i) The name and address of the issuing entity and, if applicable, the data of its registration in the Commercial Register. j) The seal of the issuing entity and the signature of at least one of its directors or authorized representatives, which may be printed, complying with legal requirements, when debentures are issued in series. k) The expression of whether the debenture includes or does not include an early amortization option in favor of the issuer and the circumstances under which it may be exercised.

2. When internationalization debentures are represented by book entries, those data mentioned in the previous paragraph that are compatible with such representation shall be recorded in the document referred to in Article 6 of Law 24/1988, of July 28, on the Securities Market.

Article 4. Information that internationalization bonds must contain. Internationalization bonds shall contain the data established for debentures in Article 3 and additionally the following: a) The name and residence of the notary before whom the public deed was executed assigning the loans and credits linked to the financing of export contracts of goods and services or the internationalization of companies to the issuance of internationalization bonds, as well as the protocol number in which said public deed is recorded. b) The circumstance that the bonds are especially guaranteed by the assignment of the loans and credits mentioned in the public deed and, if they exist, by the substitute assets contemplated in Article 34.9 of Law 14/2013, of September 27, which are assigned by public deed, and by the economic flows generated by financial derivative instruments, as well as the guarantees of these, linked to each issuance which are also assigned by public deed. c) The circumstance that the assignment collected in the preceding letter does not exclude the universal patrimonial liability of the issuing entity. d) The address of the bondholders' syndicate, if it is a series issuance and in the case where it has been constituted in accordance with what is provided in Article 34.5 of Law 14/2013, of September 27. e) If applicable, the date of registration of the issuance in the Commercial Register.

Article 5. General issuance rules.

1. The realization of internationalization debenture and bond issuances shall comply, without prejudice to what is provided in this royal decree, with the regulatory framework of the securities market. Additionally, the realization of these issuances shall comply with the covenants, statutes, or rules of the issuing entities, and with the agreements of their competent bodies, provided they do not contravene what is established in the regulatory framework of the securities market.

2. Internationalization debentures and bonds may be issued with the financial characteristics desired in accordance with what is established in Article 34 of Law 14/2013, of September 27.

3. Internationalization debentures and bonds may include early amortization clauses at the disposal of the issuer as specified in the terms of the issuance.

4. Under no circumstances shall the debtor of a loan or credit linked to the financing of export contracts of goods and services or the internationalization of companies, nor, if applicable, the guarantor of such loans or credits, be prejudiced by the issuance of internationalization debentures and bonds.

Article 6. Issuance of internationalization debentures.

1. When internationalization debentures are not issued in series, the date of their issuance must be recorded in a reliable manner.

2. Titles issued in series shall be drawn up in stub books with a master register and shall be numbered consecutively. There may be several series within the same issuance. The difference may consist in the nominal value, in the content of the rights, or in both simultaneously. However, the titles of each series shall be of equal value and confer the same rights.

3. The issuance of internationalization debentures shall entail the obligation of the issuing entity to maintain a special accounting register with the content detailed in Article 10.

4. Substitute assets that, in accordance with Article 34.9 of Law 14/2013, of September 27, back issuances of internationalization debentures, shall do so up to the limit established in said paragraph and with respect to a specific issuance of internationalization debentures carried out by the entity. Substitute assets must be linked to a specific issuance of debentures at the moment the issuance occurs and shall be identified in the special accounting register in accordance with what is provided in Article 10 of this royal decree.

5. For the purpose of calculating the limit established in Article 34.9 of Law 14/2013, of September 27, substitute assets linked to an issuance of internationalization debentures shall be valued at their market value at the moment of their linkage to the issuance of internationalization debentures.

6. Issuers of internationalization debentures shall adopt the necessary measures to avoid inappropriate imbalances between flows from the collateral portfolio and those derived from meeting the payments due for the internationalization debentures they issue.

Article 7. Issuance of internationalization bonds.

1. The assignment of loans or credits linked to the financing of export contracts of goods and services or to the internationalization of companies to an issuance of internationalization bonds shall be recorded, once the subscription period of the issuance has ended and before the disbursement by the bondholders occurs, in a public deed. Only loans and credits that are eligible in accordance with Article 34.8 of Law 14/2013, of September 27, may be assigned to internationalization bond issuances.

2. Said deed, in addition to meeting the requirements demanded by notarial legislation, shall contain, at least, the following: a) Name, address, and date of constitution of the issuing entity. b) Name, surname, and address of its administrators. c) Amount and conditions of the issuance. d) Initial date and term of subscription of the titles. e) The nature, class, and characteristics of the titles, with reference to each of the series, if there are several, expressing the nominal value of the titles, the premiums, if any, the form and terms of capital amortization, the interest they accrue, and their due dates. f) The detailed list of loans and credits linked to the financing of export contracts of goods and services and to the internationalization of companies that are assigned to the payment of the bonds, indicating their capitals, present value at the moment of issuance, and date of constitution, as well as sufficient data to identify the substitute assets linked to the issuance referred to in Article 34.9 of Law 14/2013, of September 27, and the financial derivative instruments assigned to the issuance. g) The constitution of the bondholders' syndicate when bonds are issued in series and in the cases in which this occurs in accordance with what is provided in Article 34.5 of Law 14/2013, of September 27.

3. The issuance may be registered in the sheet of the Commercial Register corresponding to the issuing entity when the same is subject to registration in said Register. The issuance of internationalization bonds shall additionally be recorded in a special accounting register kept by the issuing entity and shall have the content detailed in Article 10.

4. Substitute assets that, in accordance with Article 34.9 of Law 14/2013, of September 27, back issuances of internationalization bonds, shall do so up to the limit established in said article and with respect to a specific issuance of internationalization bonds carried out by the entity. Substitute assets must be linked to a specific issuance of bonds at the moment the issuance occurs and shall be identified in the special accounting register in accordance with Article 10.

5. For the purpose of calculating the limit established in Article 34.9 of Law 14/2013, of September 27, substitute assets linked to an issuance of internationalization bonds shall be valued at their market value at the moment of assignment to the issuance of internationalization bonds.

6. Issuers of internationalization bonds shall adopt the necessary measures to avoid inappropriate imbalances between flows from the collateral portfolio and those derived from meeting the payments due for the issued bonds.

Article 8. Bondholders' Syndicate.

1. Regarding the functioning of the bondholders' syndicate, the powers and attributes of the President and the Assembly of Holders shall be governed by what is provided in Article 34.5 of Law 14/2013, of September 27, in this royal decree, and in the consolidated text of the Capital Companies Law, approved by Royal Legislative Decree 1/2010, of July 2.

2. The bondholders' syndicate may exercise the following functions, if so agreed at the time of its constitution: a) Allow the issuing entity to postpone guarantees existing in its favor from loans or credits assigned to the issuance of internationalization bonds. b) Allow, by agreement, the issuing entity to cancel said guarantees, for reasons other than the payment of the guaranteed loan or credit. c) Allow the issuing entity to waive or settle them. d) Allow the issuing entity to novate the loan or credit, forgive it in whole or in part, or extend it. e) Prevent, in general, the issuing entity from performing any act that diminishes the rank, legal efficacy, or economic value of the loans or credits assigned as guarantee. f) Intervene, through its president, in the case of series issuance, in the public deed by which the loans or credits are assigned to the issuance of bonds, mentioned in Article 7.1. g) On behalf of the bondholders, close with the issuing entity the agreement referred to in Article 11.1.b).

Article 9. Financial derivative instruments linked to the issuance of internationalization debentures or bonds. Financial derivative instruments linked to an issuance of internationalization debentures or bonds referred to in Article 34.6, last paragraph, of Law 14/2013, of September 27, must meet the following requirements: a) They shall be interest rate swap, currency, credit default swap, or other financial derivative instrument operations whose objective is to cover interest rate risk, exchange rate risk, credit risk, or any other type incurred with the issuance. b) The contracts must specify that the issuing entity's right to the positive value and to the guarantees in its favor, if any, of the financial derivative instrument contract will not be prejudiced because said entity is declared insolvent. Likewise, this requirement shall be deemed fulfilled when the insolvency of the issuing entity does not result in the termination of the financial derivative instrument contract. c) The counterparties to the derivative contracts may not belong to the consolidatable group of the issuing entity and must receive a risk weighting, maximum of 50 percent, for the purpose of calculating own funds requirements for credit risk at the time of contracting the derivative.

Article 10. Special Accounting Register.

1. The entities referred to in Article 2, issuers of internationalization debentures or bonds, shall keep a special accounting register of the loans and credits that serve as guarantee for said issuances, the substitute assets that back them, and the financial derivative instruments linked to each issuance.

2. The special accounting register shall be updated continuously and shall consist of two differentiated parts. a) The first part shall contain: 1.º With the content determined by the Bank of Spain, the list of all loans and credits backing the internationalization debentures issued by the entity, classified according to the insolvency risk attributable to the client or the operation. 2.º The list of substitute assets backing each issuance of debentures, with explicit indication of the issuance to which they are linked and with the content established in Annex I. 3.º The list of financial derivative instruments linked to each issuance, with explicit indication of the issuance to which they are linked and with the content established in Annex II. b) The second part shall contain: 1.º With the content determined by the Bank of Spain, the list of all loans and credits backing each of the internationalization bond issuances carried out by the entity, classified according to the insolvency risk attributable to the client or the operation. 2.º The list of substitute assets backing said issuance of internationalization bonds with the content established in Annex I. 3.º The list of financial derivative instruments linked to said issuance with the content established in Annex II. To these effects, as many subdivisions of this second part shall be necessary as live internationalization bond issuances the entity has.

3. The Bank of Spain may clarify the definitions of the concepts contained in Annexes I and II and make technical adaptations to the special accounting register regulated in the preceding paragraphs.

4. The Bank of Spain shall determine the essential data of the register mentioned in this article that must be incorporated into the annual accounts of the issuing entity and shall include, at minimum: a) The following aggregated values extracted from the first part of the register: 1.º The outstanding nominal value of the entire portfolio of loans and credits that are eligible in accordance with Articles 34.6 and 8 of Law 14/2013, of September 27, and 2.º The nominal value of the substitute assets assigned to each of the issuances of internationalization debentures and its breakdown, according to their nature. b) The following aggregated values extracted from the second part of the register and calculated for each of the internationalization bond issuances of the entity: 1.º The outstanding nominal value and the present value, calculated in accordance with Article 12, of the entire portfolio of loans and credits covering the bond issuance, 2.º The nominal value and the present value, calculated in accordance with Article 12, of the entire total of live internationalization bonds of the issuance, and 3.º The nominal value of the entire total of substitute assets assigned to the issuance of internationalization bonds and its breakdown, according to their nature. c) The aggregated nominal values of the debentures...