Professional Documents
Culture Documents
ASSETS
Why Securitisation:
1. A convenient mechanism to suit changing
needs of borrowers and lenders
2. Matches supply of funds with demand
demands for funds through floating
negotiable securities
3. Shifts the source of repayment from earning
to a pool of assets
SECURITISATION OF FINANCIAL
ASSETS
Elements of Securitisation:
1. Conversion of existing illiquid assets like
loans, advances and receivables into tradable
security
2. Reconverting them into fresh assets through
capital market operations
SECURITISATION OF FINANCIAL
ASSETS
Benefits of Securitisation:
SECURITISATION OF FINANCIAL
ASSETS
Benefits of Securitisation : (contd)
4.
5.
6.
7.
SECURITISATION OF FINANCIAL
ASSETS
The Players and their Role:
Originator: An entity making loans to borrowers or
having receivables from customers
Special Purpose Vehicle: The entity which buys assets
from Originator and packages them into security for
further sale
1.
2.
a.
b.
3.
Bankruptcy remote
Separates the risk of assets from the credit risk of the seller
SECURITISATION OF FINANCIAL
ASSETS
The Players and their Role: (contd)
4.
5.
6.
7.
SECURITISATION OF FINANCIAL
ASSETS
Requirements for Eligible Collaterals:
1.
2.
3.
4.
SECURITISATION OF FINANCIAL
ASSETS
Eligible Collaterals:
1. Housing finance
2. Term loan finance
3. Car loan
4. Credit card receivables
5. Export credit
6. Etc.
SECURITISATION OF FINANCIAL
ASSETS
Eligible Collaterals:
1. Housing finance
2. Term loan finance
3. Car loan
4. Credit card receivables
5. Export credit
6. Etc.
SECURITISATION OF FINANCIAL
ASSETS
Structure of Securitisation:
1. Pass Through Certificates:
SECURITISATION OF FINANCIAL
ASSETS
Pay Through Certificates:
2.
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ASSETS
Instruments:
Depending on the structure of securitisation, the
instrument would be pass-through certificate
(PTC), a promissory note, a bond or debenture.
1. The PTC passes the cash flows from borrowers
in the same form to investors. However,
negotiability is restricted as the investor has to
return the PTC to SPV
2. Promissory note / bonds / debentures make
available different tenor maturities and yield to
different investors
SECURITISATION OF FINANCIAL
ASSETS
Securitisation Process:
1. Selection of assets by the Originator
2. Packaging of designated pool of loans and
advances (assets)
3. Underwriting by underwriters
4. Assigning or selling to of assets to SPV in
return for cash
5. Conversion of the assets into divisible
securities
SECURITISATION OF FINANCIAL
ASSETS
6.
7.
8.
9.
SECURITISATION OF FINANCIAL
ASSETS
Legislations / Enactments and their impact on securitisation
transactions:
The Companies Act 1956 affect the SPV in the following
manner:
1.
Framing of Memorandum and Article of Association of
the SPV and formation of SPV as a Limited Company
2.
Management of affairs viz. Board of Directors,
Borrowing Powers / delegation of powers for recovery of
receivables etc.
3.
Share Capital Structure
4.
Issuance of Bonds / Debentures etc. to investors (whether
by public issue or private placement) and servicing the
investors