Thursday, May 7, 2009

issues in the securitization process(2)

- cash collateral - usually provided in the form of a subordinated loan from the originator.
- the issue of a tranche of junior notes, subordinated to the securities.
- aback-up line or letter of credit from a better-rated bank.
- insurance or guarantees from suitably rated providers.
- over-collateralization within the SPV ie having more than one-to-one asset cover - say 1.25 times - for the securities by the underlying assets.
* achieving off-balance sheet status - there are significant regulatory and accounting hoops be gone through to achieve the necessary separation of the SPV from the originator. These can potentially conflict with the need for credit enhancement and\or continuing administration or servicing of the assets.

No comments: