Asset-backed securities constitute a growing segment of the US and global capital markets. The asset securitization technique, while complex, has won a secure place in corporate financing and investment portfolios because it can, paradoxically, offer originators a cheaper source of funding and investors a superior return. Not only does securitization transform illiquid assets into tradable securities, but it also manages to transform risk by means of the separation of good financial assets from a company or financial institution with little loss of revenue. The assets, once separated from the originator, are employed as backing for high-quality securities designed to appeal to investors.

For more details see the instructor's website, ABSresearch.com

Instructor

+1 212 998 0563

This two-day workshop provides ABN-AMRO professionals with an opportunity to gain a good understanding of the evolving asset-backed securities market, with an focus on helping clients make better use of their balance sheets. The emphasis is on understanding the benefits to issuers, in terms of costs and funding opportunities, of the asset-backed securities technique. We will also look at the viewpoint of investors: the returns they earn and the risks and protections they seek from possible risks; and at how the rating agencies assess ABS risks and determine credit enhancement. Special attention is given to the US ABS market, although the seminar looks at a number of different asset classes and structures that ABN-AMRO is involved in, in Europe and Asia as well as the United States. 

The workshop will include case studies of actual deals, as well as hands-on exercises, and will give participants the opportunity to demonstrate their understanding of deals through group meetings and general discussions.

One goal for participants is to develop a check list or rapid overview of the key criteria in an ABS deal, to consider when analysing an ABS structure, so as to grasp the main strengths and risks of each deal after an initial client-centered analysis.

Some of the issues to be discussed include:

• What are the key legal issues, how are typical deals structured, and what are the gray areas?
• What are issuers' concerns, and what are the strengtrhs and weaknesses of ABS relative to alternative funding sources?
• What drives ratings? Are rating agencies influenced by non-credit factors? 
• How do waterfall structures affect ABS credit quality over time?
• Servicing contracts -- how do they work? What are the rewards and risks?
• How does asset-backed commercial paper compare with term ABS?
  
• How can one evaluate different collateralized debt obligations (CDOs)?
• Synthetic ABS: How do they really work, and what are their strengths and shortcomings?
• What is whole business securitization? How does the bank implement this and other forms of "corporate cash flow financing?"



---

Day 1

• Introduction. The technique - where the market is going - size and character of the US and European markets - asset classes - pricing and credit trends.  
 
• Module 1. Legal, Tax, Regulatory and Disclosure Aspects
• True sale and bankruptcy-remote requirements 
• Legal structures for asset securitization
• Illustration: Ford Credit Auto Owner Trust
• Accounting, tax and regulatory aspects
• Comparison of major structures of consumer finance ABS 
• Soft bullet and waterfall-pay structures
  
• Case study: Belenus Securities (note: follow links for complete case study)
• Module 2. The Rating Process and Collateralized Debt Obligations 
• The rating agencies, rating levels and what they mean 
• Pool analysis;Seller/originator risk; Servicer performance risk; Swap counterparty risk; Legal risks; Sovereign risk 
• Focus on CLOs, CBOs and Synthetics 
• Cash flow vs market value structures
• Participation vs assignment of assets
• Arbitrage vs capital-saving structures
• Synthetic CDOs 
• Case study: Global High Yield Bond Trust  
• Module 3. Commercial Credit Securitization
• Originator, servicer, counterparty and manager analysis
• Legal structure analysis 
• Deal analysis and negotiating credit enhancement
• Case study: Atherton Franchise Loan ABS
• Comparison of risks and returns on security classes within particular ABS deals 
• Deal analysis: AICCO and CNH
  
• Problem deals: to HEL and back
  
• Illustration: Securitization of Student Loans
• Module 4. Multiseller Asset-Backed Commercial Paper  
• The conduit structure 
• Role of rating agencies and conduit manager
• Issuer cost and hassle analysis
• How to identify client opportunities
  
• Illustration: Diners Club
• Discussion with Mike Nawas and ABN-AMRO Professionals  

• Module 5. The Issuer's Viewpoint: Cost-Benefit Analysis  
• Securitization in the context of corporate financing choices 
• The economics of off-balance-sheet financing: how does ABS free up the balance sheet? 
• Performing a financial cost-benefit analysis for an originator: how does ABS reduce financing costs and increase the availability of credit? 
• Analysis: Ford Credit Auto Owner Trust
• The investor's viewpoint:  Risks and Pricing
• How ABS can tap a different investor base
  
• Spread and Update Reports
• ABN-AMRO Credit Card and Auto Spreads
  
• Module 6. Corporate Cash Flow Securitization
• How it works 
• Criteria for business revenues suited to securitization 
• Whole Business Securitization: explanation and applications 
• Securitization of intangibles: explanation and applications 
• Case study: Trains I PLC   
• Module 7.  Hands-on Exercises: Evaluating Asset-Backed Securities 
• Each group will be given a different deal to work on
• Their mandate is to present a convincing case to their colleagues.
  
• Discussion with ABN-AMRO Professionals  on client opportunities

Participants will be provided with a package of materials useful to the structuring and analysis of asset-backed deals, including pertinent articles, rating agency reports and sample documentation from actual deals done in the US, Europe and elsewhere.  

Additional Readings

• Introduction to ABS An excellent little introduction for those requiring a review of current European ABS techniques.
• Introduction to CDOs  Collateralized Bond Obligations and Collateralized Loan Obligations.
• Asset-Backed Commercial Paper . Financing trade receivables by pooling them in "conduits" that use flexible commercial-paper issuance.
• Whole Business Securitization . Segregating and financing corporate cash flows.