The Mechanics of Securitization

ISBN-13: 9780470609729 / Angielski / Twarda / 2013 / 208 str.

Moorad Choudhry

Opis

A step-by-step guide to implementing and closing securitization transactions Securitization is still in wide use despite the reduction in transactions. The reality is that investors and institutions continue to use this vehicle for raising funds and the demand for their use will continue to rise as the world's capital needs increase. The Mechanics of Securitization specifically analyzes and describes the process by which a bank successfully implements and closes a securitization transaction in the post subprime era. This book begins with an introduction to asset-backed securities and takes you through the historical impact of these transactions including the implications of the recent credit crisis and how the market has changed.

• Discusses, in great detail, rating agency reviews, liaising with third parties, marketing the deals, and securing investors
• Reviews due diligence and cash flow analysis techniques
• Examines credit and cash considerations as well as how to list and close deals
• Describes the process by which a bank will structure and implement the deal, and how the process is project managed and tested across internal bank departments

While securitization transactions have been taking place for over twenty-five years, there is still a lack of information on exactly how they are processed successfully. This book will put you in a better position to understand how it all happens, and show you how to effectively implement an ABS transaction yourself.

Spis treści

Foreword xi

Preface xv

PART ONE Introduction to Securitization 1

CHAPTER 1 Introduction to Securitization and Asset–Backed Securities 3

The Concept of Securitization 4

The Process of Securitization 7

Securitizing Mortgages 14

ABS Structures: A Primer on Performance Metrics and Test Measures 18

Securitization: Features of the 2007 2008 Financial Crisis 24

Summary and Conclusions 33

References 34

CHAPTER 2 The Securitization Market Post–2007 35

Market Observation 35

Impact on Rating Agencies 40

Summary and Conclusions 42

PART TWO Guide to Closing a Securitization Transaction 45

CHAPTER 3 Structuring and Execution of a Transaction 47

A Securitization Process 47

Summary and Conclusions 69

CHAPTER 4 The Rating Agency Process and Legal Review 71

Select Rating Agencies 71

Undertaking Legal Due Diligence 73

Begin Drafting Documents 78

Set Up the SPV 82

Modeling the Transaction 85

Determine Capital Structure/Trigger Levels 90

Prepare Marketing Materials 96

Pricing, Close, and Settlement 98

Summary and Conclusions 99

CHAPTER 5 Static Synthetic CDO Cash Flow Waterfall Model 101

Summary and Conclusions 107

PART THREE Transaction Closing Templates and Checklists 111

CHAPTER 6 Transaction Templates and Checklists 113

Red Sea Master Series Limited Structure Diagram 113

Underlying Asset Pool 113

Draft Term Sheet 120

Closing Process 126

Structuring Notes 127

Rating Agency Preparation and Questionnaire 129

Loan–Level Data: Rating Agency Checklist 138

Agenda for Rating Agency Site Visit 140

Legal Counsel Review 140

Form of Transfer Certificate 144

Investor and Rating Agency Presentation Template 147

In–House Credit Rating Mapping Chart: Lower and Upper Values 149

Rating Agency Presentation: Corporate Bank Origination Processes 149

Loan Transfer Schedule of Tasks 154

Loan Transfers, Accounting Movements 158

Sign–Off Document: Securitization Project 160

Securitization Testing: Finance Department 161

Accounting Process on Closing 166

EUR Junior Tranche Trade Ticket 167

Senior Tranche Trade Ticket 168

Internal Transfer Booking Process 169

Questions from Trustee, Paying Agent, and Services Provider 169

Summary and Conclusions 172

About the Authors 173

Index 175

O autorze

Suleman Baig works with the credit structuring team at Deutsche Bank AG in London. He has extensive experience dealing with first–time issuers and has structured a number of securitization transactions (both agency and principal) in a variety of asset classes and jurisdictions. Suleman graduated with a degree in mathematics from the London School of Economics.

Moorad Choudhry is Treasurer, Corporate Banking Division at the Royal Bank of Scotland, and visiting professor in the Department of Mathematical Sciences, Brunel University. He is on the editorial board of the Journal of Structured Finance and a member of the editorial advisory board of American Securitization.

Blurb

"Finally, a textbook on securitization that isn′t merely a description of the product but instead tells you exactly how to close an ABS deal invaluable assistance for the first–time bank practitioner. The templates are a great start to any deal. Highly recommended."
Mohamoud Barre Dualeh Manager, Liabilities and SME, The National Bank of Ras Al Khaimah, UAE

"An ideal companion for anyone involved in originating or arranging structured finance deals."
Abukar Ali, Bloomberg LP, London

While securitization may have slowed after the 2007 2008 financial crisis, the reality is that it still holds an important place in the world of finance. And although securitization transactions have been taking place for over thirty years, there is still a lack of information on exactly how they are successfully processed. This book will put you in a better position to understand how it all happens, and show you how to apply the techniques required.

The Mechanics of Securitization describes the process of structuring and executing an asset–backed security transaction, including the rating agency issues and legal review requirements associated with it. The book is designed to act as a checklist for ABS originators and arrangers, and includes templates that can be readily applied by commercial banks looking to undertake securitization transactions.

There is also a detailed discussion of an actual securitization transaction, which brings the text to life by illustrating the process of structuring a typical loan ABS or CLO transaction.