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Friday, 18th September 2020
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A new business model emerging in IFSC banking back
The winner of this year’s Most Innovative Deal of The Year is the the transfer of a portfolio of securities valued at approximately €23 billion from WestLB to an Irish SPV. The structure of the deal is innovative and ground breaking because it shows how Ireland can develop into a location for the domiciliation of distressed assets and guide other international banks to set up similar entities in Ireland. The benefit of these type of structures is that the sale of distressed assets to Irish banks, for domiciliation in Irish SPVs, will result in a lower tax charge on the gains arising in the event of their recovery to par values. On foot of the WestLB deal, a number of banks have submitted proposals to locate distressed assets in Dublin
The structuring and implementation of a transaction involving the transfer of a portfolio of securities valued at approximately €23 billion from German Landesbank WestLB to an Irish SPV has been recognised as the Most Innovative Deal of the Year.

The intricacies of the deal perfectly illustrate the opportunities and development towards Ireland becoming a location for the domiciliation of distressed assets. The West LB deal has already prompted a number of banks to submit proposals to locate their distressed assets in Dublin, providing a rare window of opportunity for IFSC-banks in the current market.
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With distressed assets falling to a fraction of their par values, the need for banks to write off values on a mark-to-market basis is resulting in realisation of losses in banking entities incorporated in jurisdictions with high corporation tax rates, at those higher prevailing corporation tax rates. The sale of such assets to Irish banks, for domiciliation in Irish SPVs, will result in a lower tax charge on the gains arising in the event of their recovery to par values.
Garry Ferguson


The purchase by the SPV was financed through the issuance of senior and junior notes. The financing of the junior notes was, in turn, backed up by a guarantee of an aggregate maximum of €5 billion. Any drawings under the guarantee of up to €2 billion would be covered by the owners of WestLB according to their shareholding and the remaining €3 billion would be covered by the State of North Rhine-Westphalia. Matheson Ormsby Prentice acted as Irish counsel on the structuring and implementation of the transaction. According to Garry Ferguson, who led the team at Matheson Ormsby Prentice along with Anthony Walsh 'this innovative structure aimed to shield WestLB from current market volatility arising under its structured credit portfolios. It was the first time that such a structure was put in place and it guided other institutions to put in place similar structures for the same reasons.'
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