Finance | BAHR advises on Norway’s first-ever green synthetic securitisation

On 21 November 2024, DNB Bank ASA and the EIB Group announced the first ever green synthetic securitisation by a Norwegian bank.

As described in the EIF’s press release, this landmark transaction is structured as a significant risk transfer (SRT) arrangement whereby the EIB Group provides credit protection on a NOK 17.6 billion (€1.5 billion) portfolio of SME and small Mid-Cap loans held by DNB. More specifically, the European Investment Fund (EIF), as part of the EIB Group, will provide credit risk protection to DNB on a mezzanine tranche of NOK 1.1 billion, which is then counter-guaranteed by the EIB. This structure ensures that the EIB Group assumes the mezzanine tranche risk of the referenced portfolio. Key features of the transaction include synthetic excess spread, a replenishment period, as well as a pro-rata amortisation of both the senior and mezzanine tranches, subject to performance triggers.

The EIB Group’s investment is backed by the InvestEU programme which has been set up to enable green investments in furtherance of the goals and ambitions set out in the EU’s Green Deal. Accordingly, the transaction has been structured to free up regulatory capital for DNB, which will enable the bank to extend more loans specifically for climate-friendly projects. The funds will mainly support the leasing of zero emission vehicles as well as other clean-transport technologies in sectors such as construction.

The transaction is structured to comply with the criteria for Simple, Transparent and Standardised securitisations (STS) under the EU’s Securitisation Regulation (SecReg), which is expected to come into force in Norway in the near future.

BAHR has acted as the sole Norwegian law firm on the transaction, which is the first time synthetic securitisation has been successfully used by a Norwegian bank for capital relief purposes. Having previously advised on Norway’s first ever true sale securitisation, this transaction confirms BAHR’s unrivalled position in the Norwegian structured finance market. We would like to congratulate both DNB and EIB group on this trailblazing achievement, which we expect will clear the path for other SRT transactions out of Norway in the future.