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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,
globalsecuritization.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
giddy.org
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| | | The Workshop
This workshop examines the structure and process of asset securitization
and the merits of this technique for investors. The emphasis is on understanding
the benefits, costs and risks from the investor viewpoint, and how the
rating agencies look at ABS risks, as well as the issuer's motivations.
Special attention is given to collateralized debt obligations, although
the workshop looks at a number of different asset classes and structures,
in Europe, the USA and Asia.
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.
Outline
of Workshop
Day 1
Introduction
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The ABS Market
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Asset securitization defined
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Growth and changing character of the market
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Contrast with traditional asset-based financing
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Contrast with home mortgage securitization
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Illustration: Telecom Italia
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The Securitization Process
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Before the deal: suitability of assets, originator/servicer, investors
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The process: Example of typical structure and cash flows
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Application: Finance Company Limited
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Legal, Tax, Regulatory and Disclosure Aspects
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Collateralized bonds, pass-through and pay-through securities
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Legal structures for asset securitization
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Regulatory aspects
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Tax aspects
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Focus on CLOs and CBOs
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Cash flow vs market value structures
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Participation vs assignment of assets
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Synthetic structures
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Case study: Island Finance
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Risk Assessment and Credit Enhancement
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Sources of risk
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Pool default risk
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Seller/originator risk
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Servicer performance risk
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Swap counterparty risk
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Legal risks
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Sovereign risk
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Case study: Haus MBS
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Non-credit risks, such as prepayment and market risk
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Techniques of risk reduction
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Credit risk management
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Overcollateralization and excess servicing
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Senior-subordinated structures
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Financial guarantees
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Financial guarantors
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Case Study: Global High Yield Bond Trust
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The Rating Process
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The rating agencies, rating levels and what they mean
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Pool analysis
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Originator, servicer, counterparty and manager analysis
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Legal structure analysis
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Deal analysis and negotiating credit enhancement
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Application: Fitch CLO Criteria and Geldilux
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Ongoing monitoring, reporting and re-rating
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Case study: Monitoring Geldilux
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The Investor's Viewpoint: Advantages and Disadvantages of Different
Structures
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Comparison with conventional bonds
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Comparison of major structures of ABS
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Spread analysis (using Banc One data)
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Comparison of risks and returns on security classes within particular ABS
deals
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Liquidity considerations
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Discussion of investor motivations
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Why and when should investors buy asset-backed securities?
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Case Study: Prometheus
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Group Work: Belenus
Day 2
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The Issuer's Viewpoint: Cost-Benefit Analysis
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Securitization in the context of corporate financing choices
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The economics of off-balance-sheet financing: does ABS really free up the
balance sheet?
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How to perform a financial cost-benefit analysis for an originator: does
ABS really reduce financing costs?
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Servicer profitability analysis
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Importance of retaining lines and other liquidity sources
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Why and when should companies finance with asset-backed securities?
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Mortgage-Backed Securities
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Home and commercial mortgage securitization
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Measuring and managing prepayment risk
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European case study: Haus MBS
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Other Asset Classes
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Auto loan securitization
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Case study: Ford
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Credit card securitization
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Case study: Hong Kong Card
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Equipment lease securitization
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Case study: TRAINS
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Asset-backed commercial paper
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Case study: Phebus
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Case study: Bavaria ECP
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Asset-Backed Financing: Applications in Future-Flow Securitization and
Securitization of Intangibles
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Future-flow securitization: explanation and applications
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Securitization of intangibles: explanation and applications
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Case studies: Amarcord, Baby Love, Smoking
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Hands-on Exercises: Evaluating and Selling Asset-Backed Securities
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Introduction and guidelines
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Assignment of case studies
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Presentations
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Recap of the Workshop
Pre-Workshop
Readings
Participants will benefit from reading some or all of the following,
in order of importance, before the workshop.
The
Market
Useful
Articles
Case
Studies and Deals
Selected
HypoVereinsbank Deals
Workshop
Slides
Useful
Websites
Other
resources on asset-backed securities:
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