About the Course
This course provides banking and finance
professionals with an improved understanding of developments in
securitization and structured credit risk transfer, with special
structuring transactions in a disrupted credit market. Based on the
fundamental techniques of asset securitization, the market now allows
players a much wider range of choices in managing credit risk
exposure. In addition to
covering risk transfer through asset-backed securities and
collateralized debt obligations, the
course explains risk transfer using credit derivatives and synthetic
asset securitization. It also covers
whole business securitization and related topics, and
the market for commercial as well as residential
mortgage-backed securities. The new
techniques open up fresh possibilities
for the transfer,
pricing and management of credit risk. Through hands-on applications,
participants have the
opportunity to explore a variety of legal and cashflow structures, and
of credit enhancement.
Case Studies and Materials
The course will include
case studies of actual deals, as well as hands-on
exercises illustrating the construction of CDOs and synthetics. Participants
will have access to a package of materials useful to the structuring
analysis of asset-backed deals, including pertinent articles,
rating agency reports and sample documentation from actual
deals done in the Europe, the US, and elsewhere.
Who Should Attend?
workshop will prove informative to all involved in credit risk
securities and corporate finance. It includes material of relevance to commercial
lenders and investment
and investors in asset-backed securities. Also credit specialists;
securities analysts; investment officers and fund managers; legal
individuals whose professional future may be enhanced by an
of synthetic and other advanced securitization techniques.
is the asset-backed securities market headed? What is the impact of the
are the key legal and regulatory issues in the asset-backed market
today, and how are they addressed in different forms of ABS?
determines credit enhancement and ratings in ABS and CDOs (collateralized
are the applications of asset-backed commercial paper conduits, and how
can a bank deal with funding mismatches?
can one evaluate different true-sale and synthetic CDOs?
- What is
the connection between synthetic asset-backed securities and the
credit derivatives and leveraged finance?
is the role and pricing of the leveraged super-senior tranche of some
methods are used in commercial mortgage-backed securities? How do they
differ from residential MBS?
does "whole business securitization" work?
the credit crunch, what risks and opportunities lie ahead?
Asset-Backed Commercial Paper
- The state of the
market: how to survive in a disrupted credit environment
- Getting an ABS deal
to market: the process
study: Finance Company Limited. Delegates review the
process, structure and cash flows of this deal
- Key legal
prerequisites of ABS today
- True sale issues, tax
status, regulatory capital
- Legal and economic
separability of the sponsor from the issuer
- Case study: Hyundai. What is
the legal structure of this securitization? What is the credit quality
of the pool of assets, and how is credit enhancement achieved?
- Credit enhancement
- Tiering the funding
- Cash flow analysis
- The credit crunch:
what were the fundamental mistakes made in the rating agency process?
- Has the process
changed? If so, how?
- Assignment: Moodys Ratings Revisions.
Please identify where Moody's is implementing changes to ratings
From ABS to CDOs
- What is ABCP?
- ABCP conduits:
assets, liquidity, credit enhancement
- Applications of the
flexible conduit structure
- Assignment: Hannover. How
sponsor of this ABCP conduit deal with the funding/liquidity
mismatch? What is Hannover's
- Liquidity lost: why
the ABCP market
- Beyond conduits:
structured investment vehicles
ABS vs Collateralized
- Cash flow versus market value CDOs
- CDO credit enhancement and ratings
assignment: Analysis of European CDO ratings criteria
- Tiering the
liabilities of a CDO
- CDO pricing and cash flow
- Case study: Northwesterly. What
assets in this CDO deal, and how are they funded?
- Rating CDOs: factors considered by
the rating agencies
- Using ratings loss tables to
structure credit enhancement in ABS
Exercise: Designing a CDO. Using information in the case study
and current market data, participants are set the task of designing an
arbitrage CDO. They help evaluate the pool,
legal structure and credit enhancement of a live securitization proposal
- Models rating agencies use
- Application: Risk analysis and rating of
- Credit enhancement with the Fitch Corporate Portfolio Model
European CDO Criteria
to Get an ABS Rating
Credit Risk Transfer: Credit Derivatives
derivatives work -- and how they are priced
forms of Credit Default Swaps and credit options
- Application: Jackfruit Records. A
credit default swap
- What are the ABX and
- Case study: Chase
Secured Loan Trust. Delegates learn how banks use
credit-linked notes to transfer credit risk
default swap in synthetic ABS
between synthetic ABS and the market for credit derivatives
for synthetic asset-backed securities
it works: more detail
- Case study: Latitude. Analysis of the
structure, settlement terms and risks of a synthetic CDO
regulatory issues relating to synthetics
and counterparty issues
- Team exercise: Transferring bank credit risk:
using the CDS market versus structuring
a synthetic CLO.
Leveraged Risk Transfer and Super
versus unfunded synthetic CDO tranches
and pricing of super-senior tranches
to the leveraged loan market
- Case study: Noname
Bank Synthetic CLO. Delegates work on the
a synthetic collateralized loan obligation with an unfunded
risk of funded versus unfunded risk transfer
- Group work: Orion
In this hands-on exercise, delegates assemble the elements of a
synthetic securitization with an unfunded super-senior tranche.
Bank Synthetic CLO
Orion Synthetic CDO
Derivatives 101 and
in Residential Mortgage
MBS: a variety of techniques
and restructuring in the RMBS market
with prepayment: pass-through versus cash flow reallocation
US and European markets
- Case study: RMBS No. 14.
Participants evaluate the pool, the properties and the credit
enhancement in this Dutch mortgage
- Covered bonds: how
- Case study: Covered Bond 2008.
Who owns the mortgage loans? What happens if the issuer defaults?
sale versus synthetic residential MBS
study: Memphis Synthetic RMBS. This transaction
offers participants an opportunity to
discover some of the key elements of a synthetic RMBS.
- Origins and
consequences of the subprime collapse
- Implications for
CMBS, ABCP and other forms of securitization
- Case study: Magnolia Finance.
Participants look for key features and weaknesses of this Credit Suisse
Restructuring Structured Finance
MBS: retail, office, multifamily, hotels, etc
of rental property,
loan-to-value ratios, and coverage ratios
testing and credit enhancement: cap rates, default and recovery
credit support; spread
and reserve accounts; liquidity facilities
and super-senior CMBS
- Case study: Bear Stearns
Delegates study this US deal to investigate the funding structure and
credit risk issues involved in the securitization of commercial
and managing the balloon payment risk in CMBS
techniques of synthetic commercial mortgage-backed securities
study: Castenea Synthetic CMBS.
Delegates learn how to apply the synthetic technique to commercial
- Consequences of the
credit collapse for ABS
- Prospects for
oversight and regulation of ratings.
- Overview of monoline
insurance model and ratings leverage
- Disruption from
misconceived insurance at the triple-A level
- Whole business
- Case study: Arsenal WBS. List the
parties involved in this kind of UK securitization. What are the roles
What is the impact of the insurance downgrade? How are investors
- When things went
wrong: counterparty risk and erosion of bank capital
bank portfolios: mortgage assets, CDOs,
and leveraged loan
opportunities, new risks in structured finance and securitization
RMBS. No 14
Bear Stearns CMBS 2007
Ian Giddy is
on the faculty of finance at New York University, USA. He has taught
finance at NYU, Columbia,
Wharton, Chicago and abroad for the past thirty years. He was
of International Fixed Income Research at Drexel Burnham Lambert from
to 1989. The author of more than fifty articles on international
Dr Giddy has served at the International Monetary Fund and the U.S.
and has been a consultant with numerous financial institutions and
in Europe, North America, the Middle East and Asia. He has lectured in
more than forty-five countries, and has been involved in the
securities market for over 15 years. He is the author or co-author of
Money Market, The Handbook of International Finance, Cases
in International Finance, Global Financial Markets, Asset
Securitization in Asia, and The
Hudson River Watertrail Guide. He and his
wife are the founders of Cloudbridge, a nature reserve in Costa