Structured Finance

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SECURITISATION 101
  • Structured Finance
  • Year : Sep 2019
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Summary

Securitisation is seen as an alternative to on-balance sheet funding and a form of disintermediation, allowing corporates and other institutions to raise capital directly with the Debt Capital Markets and often at a reduced cost. In essence, securitisation consists of raising funding on the back of a pool of assets, which are generally receivables. For non-synthetic securitisations, these assets are typically sold to a bankruptcy-remote special purpose vehicle (“SPV”) which in turns issues securities to finance such acquisition. This allows for de-linkage between the rating of the securities and the rating of, amongst others, the Originator/Seller of the assets. This report explains the fundamentals of non-synthetic securitisation as well as GCR Ratings’ (“GCR”’s) process for rating securities issued within a securitisation scheme.

Additional Information

Table of Contents 

Introduction

What is Securitisation?

Mechanism of a Non-Synthetic Securitisation Transaction 

The Parties to a Securitisation 

Characteristics of the Securities Issued in a Securitisation Scheme

Motivation for Securitisation 

For the Originator/ Seller: 

For Investors: 

Disadvantages of Securitisation

Structural Features

Revolving Period 

Amortisation Structures 

Priority of Payments 

Credit Enhancement .

Internal Credit Enhancement 

External Credit Enhancement 

Risks Related to a Securitisation Transaction

Asset-Related Risk

Legal Risk

Bankruptcy Remoteness of the SPV

True Sale of the Asset Portfolio

Legal, Valid and Binding Nature of All Related Documents

Structural Risk

Counterparty Risk

The Credit Rating of Asset-Backed Securities

Historical Data Analysis

Legal and Tax Analysis

Counterparty Analysis

Cash Flow Analysis 

Disclaimer

Analytical Contacts

Glossary of Terms/Acronyms

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