Appendix III: the characteristics of securitisation.Exhibit 34. Basic securitisation process
Basic Securitisation Structure (I)
Exhibit 35. Asset-specific types of securitisation
Basic Securitisation Structure (II)
Any asset class with a stable stream of cash flow can in principle be included in the reference portfolio and securtised.
Asset type determines the type and classification of the ABS structure (ABS, MBS See Mb/sec.
MBS - mobile broadband services , CDO (Collaborative Data Objects) A programming interface from Microsoft for accessing MAPI-based e-mail, calendaring and scheduling servers. Originally called "OLE Messaging" and "Active Messaging," CDO wraps the Enhanced MAPI library into a COM object that provides the , etc.)
Underyling pools can include the following: aircraft/auto/equipment leases, corporate debt, credit cards, gov't related payments, loans (consumer, home equity, project, student), project finance/operating income, trade receivables
Three types of underlying pools:
1. "Static" (standing) pool
--asset pool fixed w/o substitution
--loan balances fixed w/o redraw To redisplay an image on screen whether text or graphics. The concept is that the first time elements are displayed, they are "drawn," and if something is changed, they are "redrawn." Applications often have a Refresh command that redraws the screen. facilities or adjustable credit limits
--pre-defined principal amortisation schedule
--e.g. mortgages (res.&com.), leases, corporate loans
2. "Revolving" pool
--asset pool varies; allows substitution
--loan balances are adjustable up to max. limits
--no pre-defined principal amortisation schedule
--e.g. credit cards, trade receivables, corp. loans/bonds
3. "Substituting" pool
--allows substitution of new loans within defined credit parameters as org. loans pay down
--loan balances fixed
--principal does not amortise during substitution
--e.g. corporate bonds, some res. mortgages/consumer loans
Asset Originator/Sponsoring Entity
Underlying reference asset portfolio
For loan pool:
* credit transactions are complex, highly customised and individual procedures
* credits aremainly held by the issuing bank Issuing bank
Bank that issues a letter of credit. until the maturity date
* portfolio mgtm. is very difficult
Exhibit 36. Organisation of asset transfer
Basic Securitisation Structure (III)
1. Asset transfer from the originator/sponsor to the issuing vehicle:
--legal form: legal/equitable assignment, contingent perfection or sub-participation (should represent a "perfection of security interest" (true sale))
--assets should be immune from bankruptcy estate of seller (non-recourse financing)
--originator retains no legal interest in assets. though some economic benefit may be retained
--compliance with consumer protection laws consumer protection laws n. almost all states and the federal government have enacted laws and set up agencies to protect the consumer (the retail purchasers of goods and services) from inferior, adulterated, hazardous and deceptively advertised products, and
--regulatory aspects specific to banks, consumer finance companies, etc.
3. Issuing vehicle is a "bankruptcy-remote" entity:
--arrangement to prevent issuer from incurring additional liabilities or expenses
--restrictive covenants: issuer must not pursue voluntary bankruptcy voluntary bankruptcy n. the filing for bankruptcy by a debtor who believes he/she/it cannot pay bills and has more debts than assets. Voluntary bankruptcy differs from "involuntary bankruptcy" filed by creditors owed money to bring the debtor before the bankruptcy proceedings
--no "substantive consolidation", i.e. issuer's assets are not considered part of originator's assets
4. Issuer profiles and legal forms vary according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. jurisdiction and asset type:
--master trust: pool of trusts or a pool of assets in one trust agreement
--owner trust: cash flows are tailored to create certain maturities of tranches Tranches
A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice". (ref. investor targets)
--grantor trust: cash flows as passed directly through to investors w/o manipulation
Exhibit 37. Structure of securitised debt issue.
Basic Securitisation Structure (IV)
2. Cash Flow Profile
--fixed/floating rate coupons
--bullet, sinking fund sinking fund, sum set apart periodically from the income of a government or a business and allowed to accumulate in order ultimately to pay off a debt. A preferred investment for a sinking fund is the purchase of the government's or firm's bonds that are to be paid or pass-through payment structure
--callable, extendable or putable
--"capped", "uncapped" or "available funds"
--"clean-up call" or "step-up coupon"
Andreas A. Jobst
London School of Economics and Political Science London School of Economics and Political Science, at London, England; founded 1895, recognized as a school of the Univ. of London (see London, Univ. of) in 1900. (LSE LSE - Language Sensitive Editor ) and J.W. Goethe Universitat Frankfurt am Main