Professional Documents
Culture Documents
ACCOUNTS
RECEIVABLE
SALE OR
ASSIGNMENT SPECIAL
PURPOSE
VEHICLE
ISSUES
ACCOUNTS
ASSET-BACKED
RECEIVABLE
CERTIFICATES
IsIsthe
thecompany
company
ready?
ready?
Are
Arethe
theassets
assets
suitable?
suitable?
What
Whatpool?
pool?
What
Whatlegal
legal
structure?
structure?
What
Whatcredit
credit
enhancement?
enhancement?
Decisions
Form of
Form of transfer Form of special Form of credit Form of cash flow
transformation of
of asset purpose vehicle enhancement allocation
cash flows
Finance Co.’s
Customers
Hire-Purchase
Agreement
Finance Co.’s
Customers
Hire-Purchase
Agreement
Proceeds Proceeds
Finance Co. Ltd FCL 1997-A
Investors
(Seller) (Special Purpose Co.)
Finance Co.’s
Customers
Proceeds Proceeds
Finance Co. Ltd FCL 1997-A
Investors
(Seller) (Special Purpose Co.)
Sale of Assets Asset-Backed
Securities
Trustee
Trust
Agreement
Proceeds Proceeds
Finance Co. Ltd FCL 1997-A
Investors
(Seller) (Special Purpose Co.)
Sale of Assets Asset-Backed
Securities
Trustee
Trust
Agreement
Finance Co.’s
Customers
Financial Guarantee
Trustee
Trustee Guarantee Provider
Responsibilities Responsibilities
q Credit risks
q Liquidity risk
q Servicer performance risk
q Swap counterparty risk
q Guarantor risk
q Legal risks
q Sovereign risk
q Interest rate and currency risks
q Prepayment risks
SPONSORING CREDIT
CREDIT
COMPANY ENHANCEMENT
ENHANCEMENT
ACCOUNTS
RECEIVABLE
SOVEREIGN
SOVEREIGN
PROTECTIONS
PROTECTIONS
SALE OR SPECIAL
ASSIGNMENT
PURPOSE
VEHICLE
INTEREST
INTERESTRATE/
RATE/
ACCOUNTS
ISSUES CURRENCY
CURRENCY
ASSET-BACKED
RECEIVABLE CERTIFICATES HEDGES
HEDGES
CASH
CASHFLOW
FLOW
REALLOCATION
REALLOCATION
Proceeds Proceeds
Finance Co. Ltd FCL 1997-A
Investors
(Seller) (Special Purpose Co.)
Sale of Assets Asset-Backed
Securities
Financial Guarantee
Trustee Provider
Trust Guarantee
(if required)
Agreement Agreement
Senior
Lower Rating
Proceeds
Finance Co. Ltd FCL 1997-A
Subordinated
(Seller) (Special Purpose Co.)
Sale of Assets
No Rating
More Subordinated
Financial Guarantee
Provider
Guarantee
(if required)
Agreement
q Senior/Sub or overcollateralization
q Reserve and liquidity accounts and lines
q Excess cash flow
q Third-party guarantees
Standard &
Moody’s Poor’s Interpretation
Aaa AAA High-quality debt instruments
Aa AA
A A Strong to adequate ability to
Baa BBB pay principal and interest
Ba BB Ability to pay interest and
B B principal speculative
Caa CCC
Ca CC
C C
D In default
Copyright ©2001 Ian H. Giddy globalsecuritization.com The Securitization Process32
Typical Rating Analysis
Originator’s credit underwriting standards
Pre-securitization Screening of assets to be included in the portfolio
risk reduction
Diversification of the portfolio
Originator/Seller/Servicer
Credit quality of
deal participants Trustee, swap counterparties
Guarantors
Direct recourse
“Internal” Senior/subordination or overcollateralization
credit enhancement Reserve or spread accounts
Credit enhancement
“Third party” Cash collateralized accounts
credit enhancement Financial guarantees
Rating
Copyright ©2001 Ian H. Giddy globalsecuritization.com The Securitization Process33
Credit Enhancement
q Overcollateralization
q Senior/Sub or
q Reserve and liquidity accounts and lines
q Excess cash flow
q Third-party guarantees
SPECIAL-PURPOSE VEHICLE
SENIOR
COLLATERAL POOL ASSET-BACKED
SECURITIES
“EQUITY” ABS
OVER-COLLATERAL
(owned by seller)
1 • Determination of structure
• Information Memorandum
• Commencement of documentation
2
• Detailed cash flow analysis
3
• R e s u lt of cash flow analysis
months • Determination of eligible receivables
7 • Completion of documentation
This schedule serves as an indication only and may • Purchase of receivables and issuance of securities
vary from transaction to transaction.
Asset-Backed Securities:
Legal and Regulatory Issues
q Legal
u The Transfer
u The Special-Purpose Vehicle
q Taxation
q AccountingTreatment
q Bank Regulatory Treatment
Form of transfer
of asset
True Sale
Alternative:
Assignment Credit swap
(Synthetic ABS)
Collateral
CHASE (SPONSOR)
CREDIT CARD
RECEIVABLES
SALE OR
ASSIGNMENT SPECIAL
PURPOSE
VEHICLE
ISSUES
CREDIT CARD ASSET-BACKED
RECEIVABLES CERTIFICATES
HVB (Originator)
REFERENCE
POOL OF LOANS
(Stay on
balance sheet)
CREDIT SWAP
AGREEMENT SPECIAL
PURPOSE
VEHICLE
ISSUES
TOP QUALITY ASSET-BACKED
INVESTMENTS CERTIFICATES
Class A-1 to A6
Class B Class D
Receivables
Class C
Class D
Class B
Class C
Class D
Receivables
Class A-1 to A6
Class B
Class C
Class D
Currency Financial
Swaps Guarantees
ASIA Ltd
General Re
CapMac
Franchisees
(Borrowers)
Loan
Agreement
Loan
Payments Proceeds Proceeds
Atherton Capital Atherton FLF 1998-A
Investors
(Seller) (Special Purpose Co.)
Sale of Assets Asset-Backed
Servicing Advisor Securities
Oil (under
YPF sales agreement) Oil Trading Co. Notes
(Argentinian Noteholders
(Cayman Is. SPV)
oil producer)
US$ US$
Oil
(under purchase Fixed
agreement) debt payments
Ian H. Giddy
Stern School of Business
New York University
44 West 4th Street, New York, NY 10012, USA
Tel 212-998-0426
ian.giddy@nyu.edu
http://giddy.org