French securitisation fund

The fonds commun de titrisation is one of the two forms of securitisation vehicle provided for by the French Monetary and Financial Code, the other being the société de titrisation (securitisation company). Set up as a co-ownership, it has no legal personality. An authorised portfolio management company manages it and a depositary established in France holds its assets in custody. Until 2008, this vehicle was called a fonds commun de créances. The securitisation vehicle takes on risk by acquiring receivables, granting loans, or entering into sub-participations or derivative contracts. It funds this exposure by issuing units and debt securities or by borrowing. Soliciting investors for its securities is restricted to qualified investors. Its units carry different rights: the fund’s regulations subordinate some classes to others, which creates risk tranches. Since the ordinance of 4 October 2017 and decree No. 2018-1004 of 19 November 2018, a securitisation vehicle with limited leverage may grant loans to non-financial companies. Each loan has a maturity shorter than the vehicle’s remaining life. A company deals with an FCT in two situations. It sells its trade receivables to the fund in a securitisation programme and receives financing backed by those receivables. It obtains a loan from the fund, as it would from a debt fund.

A distribution group sells its new invoices to an FCT every month, for an outstanding balance of €120m of trade receivables. The fund finances this balance with €100m of senior units that qualified investors subscribe and €20m of subordinated units that the group retains. The subordinated units absorb the first payment defaults before any loss on the senior units.

• The sale price of the receivables and the share retained as subordinated units
• The eligibility criteria for the receivables sold to the fund
• The maturity of the loans the fund grants, shorter than its remaining life
• The management company and the depositary appointed for the fund