What is the same
The unit that matters to investors is the compartment, not the company around it. Under the Luxembourg Securitisation Law each compartment answers only for its own notes, whether it belongs to a vehicle with one compartment or to an issuer with many. The notes carry their own ISIN, sit in an ordinary securities account and can carry the family’s chosen name.
The protection of the noteholders is therefore the same in both routes. How it works is explained in compartment segregation explained .
Side by side
Why a neutral, orphan issuer matters
A vehicle of your own does not have to be owned by you. In securitisation the shares of the issuer are usually held by an independent foundation, such as a Dutch stichting. The issuer is then an orphan entity: dedicated to the family’s transactions, but not part of its group.
- →Separation in both directions: the family’s creditors have no claim on the vehicle, and nothing that happens inside the vehicle reaches the family’s own estate.
- →Credibility with co-investors: they subscribe notes of a neutral issuer whose board acts for all noteholders, not of a company owned by one of them.
- →Easier dealings with banks and custodians: an independent board, segregated compartments and standard documentation are what they expect to see.
- →Continuity: no shareholding has to be transferred or restructured as the family evolves. What moves are the notes.
The family keeps the economic exposure through the notes, and the investment terms of each compartment are set out in a mandate agreed with it. The tax and reporting treatment on the family’s side is a question for its own advisers.
What a vehicle of your own requires
Documentation
A note programme and private placement memorandum for the vehicle, prepared with counsel, and final terms for each series.
Ownership
The shares of the vehicle can be held by an independent foundation, which makes the issuer an orphan entity.
Board of directors
Directors appointed for the vehicle, with meetings, resolutions, minutes and corporate secretarial work.
Accounting and audit
Annual accounts for the vehicle and for each compartment, audited by an approved statutory auditor.
Tax and housekeeping
Tax filings, registers and the other obligations of a Luxembourg company.
Issuance
ISIN, custodian, settlement and clearing, and a paying agent for coupons and redemptions.
With a dedicated compartment, all of this already exists at the level of the issuer. Each new transaction is a new compartment and a set of final terms.
How to choose
A dedicated compartment is usually the right start: a first transaction, a family testing the structure, or a programme whose size is not yet known. Nothing has to be incorporated, and the running costs sit at compartment level only.
A vehicle of your own makes sense when several transactions are expected over time, when the family wants the issuer itself, not only the notes, to carry its name, or when it wants a board composed for its own needs. The entity costs are then spread across more compartments. For the alternative of a fund, see securitised note or fund .
Frequently asked questions
Is a dedicated compartment as protected as a vehicle of your own?
Yes. Under the Luxembourg Securitisation Law the assets of a compartment answer only for the notes of that compartment, and no other compartment of the issuer has any claim on them. The segregation is statutory in both cases, so the protection of the noteholders is the same.
Why would a family not own the shares of its own vehicle?
Because an issuer owned by a foundation rather than by the family is separate from the family’s estate in both directions: the family’s creditors have no claim on it, and nothing that happens inside it reaches the family. It is also what co-investors and banks expect from a neutral issuer. The family keeps the economic exposure through the notes it holds.
Can a dedicated compartment later become a vehicle of its own?
A compartment cannot be converted into a company, but a family can start with a dedicated compartment and set up its own vehicle once it expects a programme of transactions. Later transactions are then issued from the new vehicle.
Does either route make the vehicle a regulated fund?
A securitisation vehicle is not an undertaking for collective investment. Whether a given structure could fall within the rules on alternative investment funds depends on how the assets are managed, and is reviewed with counsel for each transaction.
Weighing the two routes?
Tell us which assets you have in mind and over what horizon. We come back with the route that fits and indicative terms.
Open the configuratorRelated