Center for Financial Studies
Workshop on
The NewTechniques
of Asset-Backed Securities
Instructor:
Prof. Ian Giddy
New York University


Asset Securitization

Asset-backed securities constitute a growing segment of the European 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

Ian Giddy has taught finance at NYU, Columbia, Wharton, Chicago and in 30+ countries abroad for the past two decades. He was Director of International Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The author of more than fifty articles on international finance, he has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous corporations and financial institutions in the U.S. and abroad. He is the author or co-author of The International Money Market, The Handbook of International Finance, Cases in International Finance, Global Financial Markets, Asset Securitization in Asia and The Hudson River Watertrail Guide.


Prof Ian Giddy
Stern School of Business
New York University
44 West 4th Street
New York, NY 10024
USA

+1 212 998 0332



Related websites:
 

    The Workshop

This workshop provides investors, issuers and bankers with an evaluation of trends in the asset-backed securities market, with an focus on the legal and credit structures of some of the newer techniques.  The emphasis is on understanding the benefits, costs and risks from the issuer's and the investor's viewpoints, and how the rating agencies look at ABS risks. Special attention is given to the European ABS market, although the workshop looks at a number of different asset classes and structures, in the USA and Asia as well as Europe. 

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 rapid analysis.

Some of the issues to be discussed include:

  • What are the key legal issues, and why are they sometimes circumvented?
  • What are bank regulators' concerns, and what are the flaws in the new Basel 2 guidelines?
  • What drives ratings? Are rating agencies influenced by non-credit factors? How can this lead to weaknesses in the legal structure?
  • Servicers - the weak link or hidden strength?
  • How can one evaluate different collateralized debt obligations (CDOs)?
  • How do waterfall structures allow ABS quality to improve to levels better than the ratings?
  • Synthetic ABS: How do they really work, and what are theri strengths and shortcomings?
  • When is a so-called ABS really a corporate bond -- where the investor is simply taking business risk? What is "whole business securitization?"
  • Future flows and intangibles - can the securitization technique really "finance thin air?"


Outline of Workshop

Day 1

    Introduction
     
  • The ABS Market Today 
    • Growth and changing character of the ABS market 
    • Contrast between North American, European and Asian markets 
    • Potential impact of new Basel capital guidelines
    • The process: Example of typical structure and cash flows 
    • Application: Finance Company Limited 
  • Legal, Tax, Regulatory and Disclosure Aspects
    • True sale and bankruptcy-remote requirements 
    • Legal structures for asset securitization
    • Illustration: Ford Motor Credit
    • Accounting aspects
    • Regulatory aspects
    • Tax aspects
    • Focus: The impact of Basel II on ABS
    • Case study: Haus MBS 
  • The Rating Process and Credit Enhancement
    • The rating agencies, rating levels and what they mean 
    • Pool analysis;Seller/originator risk; Servicer performance risk; Swap counterparty risk; Legal risks; Sovereign risk 
    • Originator, servicer, counterparty and manager analysis
    • Case study: Atherton franchise loan deal
    • Legal structure analysis 
    • Deal analysis and negotiating credit enhancement
    • Techniques of credit enhancement: Credit risk management; Overcollateralization; Senior-subordinated structures; Excess servicing and liquidity accounts; Financial guarantees 
    • Application: Fitch CLO Criteria and Geldilux 2002 
    • Ongoing monitoring, reporting and re-rating 
    • Application: Belenus: The Hidden Benefits of Waterfalls
  • 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 studies: Promise 2002-1, TDA 2, Harbourmaster 3
    • Case study: Global High Yield Bond Trust 
Day 2
  • The Issuer's Viewpoint: Cost-Benefit Analysis 
    • Securitization in the context of corporate financing choices 
    • The economics of off-balance-sheet financing: does ABS really free up the balance sheet? 
    • How to perform a financial cost-benefit analysis for an originator: does ABS really reduce financing costs? 
    • Illustration: Bank ABS, Ford Motor Credit
  • Focus: Mortgage-Backed Securities (Repackaging the Cash Flows) 
    • Home and commercial mortgage securitization 
    • Measuring and managing prepayment risk 
    • US case study: Fannie Mae
  • Focus: Multiseller Asset-Backed Commercial Paper 
    • The conduit structure 
    • Role of rating agencies and conduit manager
    • Case study: Phebus 
    • Case study: Bavaria ECP 
  • Focus: Whole Business Securitization
    • How it works 
    • Criteria for business revenues suited to securitization 
    • Case study: Trains PLC
  • Hands-on Exercises: Evaluating Asset-Backed Securities 
  • Recap of the Workshop  


The seminar is of relevance to both potential originators and investors in asset-backed securities: corporate treasurers and CFOs; investment officers; investment fund managers; bank officers; securities analysts; legal and accounting advisors; and other individuals whose professional future may be enhanced by an understanding of the asset securitization technique. 

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 Europe and elsewhere. 



Contact:  Christiane Bauder at bauder@ifk-cfs.de


Other resources on asset-backed securities: 
 
Seminars conducted by Ian Giddy Powerpoint presentation documents
Articles Case studies
Spreadsheets Internet links

giddy.org | financefixit.com | ABSresearch.com | cloudbridge.org | contact
Copyright ©2003  Ian Giddy. All rights reserved.