Aussie ABS can be ECB repo-eligible

The European Central Bank has accepted the first securities backed by Australian receivables as being eligible for inclusion on the eligible assets database of the European Central Bank ("ECB"), making them "repo-eligible" with the ECB.

It is hoped that ECB repo-eligibility will increase the investor base and liquidity of Australian asset-backed and residential mortgage-backed securities.

The first securities backed by Australian assets to be repo-eligible were issued under Macquarie Bank's recently established repackaging programme, the ARC Funding Programme, which was structured with the purpose of taking advantage of these operations of the ECB. Those securities are backed by securities issued by Macquarie Leasing's SMART securitisation trust, the underlying assets of which are commercial equipment and motor vehicle lease and hire purchase receivables.

Below, we set out some of the key requirements of the criteria published by the ECB for the repo-eligibility of securities:

• The issuer of the securities must be established in the European Economic Area ("EEA") or in one of the non-EEA G-10 countries unless the securities are asset-backed securities in which case the issuer must be incorporated in the EEA.
• The securities must be:
  • senior ranking and meet high credit standards;
  • denominated in Euro and issued in the EEA; and
  • admitted to trading on a regulated market.
• If the securities are issued in bearer form, they must comply with the new global note format which requires entering into an agreement with the relevant clearing houses.

On 24 June 2008, the first series of securities issued under the ARC Funding Programme were included on the ECB's eligible assets database. Clayton Utz acted for Macquarie Bank in that transaction.