Azerbaijan’s parliament approved in the third reading a legal framework for securitization, allowing monetary claims from loans, financial leases and factoring agreements to be pooled as assets backing bond issues.
Under the legislation, a securitization company would be able to issue bonds whose payments are funded by cash flows from assets transferred to it, according to Vesti Baku.
Claims tied to corporate bonds that are not listed on a stock exchange could also be included. Azerbaijan’s Central Bank would have authority to designate additional types of monetary claims eligible for securitization.
Assets Excluded From Securitization
The legislation excludes debts owed by people or entities in bankruptcy proceedings, receivables that do not provide for periodic payments and assets already encumbered by obligations to third parties. Restrictions would also apply to certain preferential business loans.
Once eligible assets are entered in a special registry, they would be treated as pledged by law in favor of holders of the securitization bonds.
The bill was first considered on Oct. 16. Approval in the third reading completes its parliamentary consideration, although the new rules will take effect only after the remaining legislative procedures and formal enactment.
Report said the amendments affect the laws on banks and the securities market and are intended to create additional liquidity and investment tools.