Under the Italian government Ecobonus incentive scheme, construction and real estate development companies carrying out eligible residential energy efficiency projects generate “ use it or lose it” tax claims (equal to 110% of value of such works). These may be sold or utilised to set off corporate tax liabilities over a period of 4 yrs.
Opportunity to front the acquisition of tax claims from Italian construction companies/general contractors at significant discount, selling them to large corporates with ample tax capacity and good credit standing with ~18% contracted up- lift in price. Market opportunity linked to supply/demand shift due to combination of i) Italian Banks bid on tax claims evaporating having exceeded allocated tax capacity for this asset (~€ 90bn on BS so far), ii) strict RWA rules imposed on acquiring such tax claims for trading, iii) strong pipeline for completed eligible works and material stock of claims peaking at the time of lower bank demand. Banca Sistema will act as the servicer for the deal which entails managing the purchase and sales process. It is a requirement by operational law that this role is taken by a regulated Italian bank
Italian Securitisation protections: tax claims to be held in dedicated SPV, sponsored and controlled by PSC with statutory protections covering asset and cash flow pledge, shorter claw back period and statutory bank account pledge.
Corporate recourse: SPV will back to back purchases with contracted sales to multiple corporate clients with ample tax capacity to off set and monetise such claims.
The total stock of tax claims not yet set-off and available for sale is estimated to be over € 50bn.
Sales to generate predictable monthly cashflows over 4 years, enabling the corporate buyer to offset a wide range of Italian tax liabilities accruing monthly, e.g. employee's social security contributions, income tax and severance, corporate income tax and VAT.
There are multiple sellers of such claims with no material tax liabilities ready to sell the tax claims up-front at ca.76% of nominal value, to avoid losing them. We have identified a few medium/large and credit worthy corporates willing to off-set their tax liabilities by buying tax claims at the point of set off for 95-96%.
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Significant demand from Italian corporates to reduce future tax liability by 4-5% (over next 4 yrs).
The opportunity is expected to generate returns of ~17% Gross IRR
Key Statistics Facility
Italian Securitisation
Country Exposure
Italy
Industry
Government Tax Claims
Investment
€100m
Sourcing
Direct
Past performance is no indication of future results. There can be no assurance that the Fund will achieve its objectives or avoid substantial losses. Please also refer to the Disclaimer and Track Record Notes at the back of the presentation The following data is based on internal PSC calculations, not all of which have been audited, and is subject to change. Actual results may differ from the results presented. Gross performance results are shown gross of investment management and performance fees, as well as all organisational and ongoing fund fees, costs and expenses (including audit and depository services). Return targets and structural protections are intended to be indicative. There can be no guarantee that any or all of the prospective investments will meet these investment criteria or that the target returns are achieved. The target returns are premised on a number of factors number of factors including prior investments made by funds managed or advised by Pollen Street and opportunities that Pollen Street is currently seeing and/or expects to see in the future, and assumptions with respect to the Fund's portfolio investment returns and the costs and expenses applicable to the Fund which are inherently uncertain and are subject to numerous business, industry, market, regulatory, geo-political, competitive and financial risks that are outside of Pollen Street's control. There can be no assurance that the assumptions made in connection with the target returns will prove accurate, and actual results may differ materially, including the possibility that an Investor may lose some or all of any invested capital. The inclusion of the target returns herein should not be regarded as an indication that Pollen Street or any of its affiliates or their respective representatives consider the target returns to be a reliable prediction of future events, and the target returns should not be relied upon as such target returns are neither a forecast nor a guarantee. Neither Pollen Street nor any of its affiliates or any of their respective representatives have made or make any representation to any person regarding the target returns and none of them intends to update or otherwise revise the target returns to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the target returns are later shown to be incorrect.
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