Cassa Depositi e Prestiti's Covered Bond Program

Abstract

Since its establishment in 1850, Cassa Depositi e Prestiti has been operating as a specialized lender to the public sector in Italy. Today CDP enjoys a dominant position in the public-finance sector. Going forward, CDP's public-sector lending activities will be increasingly funded through the issuance of covered bonds backed by loans to Italian regions and local authorities. According to legislation enabling CDP to issue covered bonds, cover assets can be effectively ring-fenced for the benefit of covered bond holders, even though those assets remain on the issuer's balance sheet, thus making the bonds and the assets backing the bonds immune from the risk of the issuer's default. CDP's obligation to replace non-performing assets and to add further eligible assets to the collateral portfolio to ensure a sufficient level of credit support gives investors recourse against CDP's entire core business. The covered bonds also benefit from securitization tools that provide additional support upon the occurrence of certain trigger events, for example additional cash collateral or deposit of cash flow from the collateral into a special collection account in the event of credit-rating downgrades.