TheExpandingFrontiersofAssetSecuritization.ppt

The Expanding Frontiers of Asset Securitization Outline What is Securitization? What is Asset-Backed Securitization? The Collateral Types of ABS The Development of the ABS Market The Advantages of Securitization The Process of Securitization Taiwan’s Difficulties Reference What is Securitization? Securitization A company raises money from capital market by issuing securities that are backed by specific assets. In most cases, the underlying assets are loans, such as mortgage loans or auto loans. The cash flow from the underlying assets usually is the source of funds for the borrower/issuer to make payments on the securities. Securitization products generally are viewed as including the following: asset-backed securities, mortgage-backed securities,corporate bond, commercial papers, etc. Securitization What is Asset-Backed Securitization? Asset-Backed Securitization Asset-backed Securities (ABS) are essentially securities entitled to the cash flows from a specific pool of assets These assets can be a variety of loans or receivables, such as: Credit Card receivables Auto loans Mortgages In an ABS deal, the issuer, or loan originator: transfers assets into a SPV; the SPV issues securities and sells these securities to investors. investors are entitled to the cash flow from the assets. ABS Typical Legal Structure True Sale An actual sale, as distinct from a secured borrowing, which means that assets transferred to an SPV are not expected to be consolidated with those of the sponsor in the event of the sponsor’s bankruptcy. Rating agencies usually require what is called a truesale opinion from a law firm before the securities can receive a rating higher than that of the sponsor. Example Cardholders pay monthly principal and interest to American Express for their monthly credit card payments, including principal, interests, annual charges and other penalty charges. Example The Collateral Types of ABS Assets Types ABS Issuers - I Credit C