- resources in finance

Standard Bank of South Africa

Securitisation Workshop

Prof Ian Giddy
Stern School of Business, New York University

The Course

Asset-backed securities constitute a growing and complex segment of the global capital markets and have become widely employed in developing countries such as South Africa as well as developed countries. This course provides a brief insight into the state of the art in securitisation and structured credit risk transfer. In addition to covering new developments in collateralized debt obligations, the course explains whole business securitisation and related topics, and the growing market for commercial as well as residential mortgage-backed securities. It explains risk transfer using synthetic asset securitisation, a versatile and fast-growing technique in the ABS market. It opens new possibilities for the transfer, pricing and management of credit risk. Asset-backed commercial paper conduits, a growing sector, offer participants the opportunitiy to explore a variety of legal and cashflow structures, and of credit enhancement.

Method and Materials
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 interaction and workshop discussions.

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

Pre-Course Reading

Issues to be Discussed

  • Where is the asset-backed securities market headed?
  • What are the key legal and regulatory issues in the asset-backed market today, and how are they addressed in different forms of ABS?
  • What drives credit ratings on ABS, and how is credit enhancement achieved?
  • How can one evaluate different collateralized debt obligations (CDOs)? How are they structured?
  • How can one calculate the required credit enhancement for different tranches backed by a pool of assets?
  • What is the connection between synthetic asset-backed securities and the markets for credit derivatives?
  • How does asset-backed commercial paper work?

Securitisation Workshop: Agenda

Asset-Backed Securities Explained
  • The state of the market
  • Getting an ABS deal to market
  • Case study: Finance Company Bhd. We review the process, structure and cash flows of this deal
  • Credit enhancement
  • Tiering the funding structure
  • Cash flow analysis and pricing
  • Key legal prerequisites of ABS today
  • Case study: Ford Motor Credit. What is the legal status of this securitisation? Is it a true sale? Is the SPV independent?
  • Pool analysis, structure analysis, and determinants of credit risk
  • The technique of credit enhancement
  • Getting a rating: sequence and requirements

From ABS to CDOs and Synthetics

  • Classic ABS vs Collateralized Debt Obligations
  • Linkages between CDOs, credit derivatives and leveraged finance
  • Cash flow versus market value CDOs
  • CDO credit enhancement and ratings
  • Tiering the liabilities of a CDO
  • CDO pricing and cash flow analysis
  • Case study: Atrium. What are the 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
  • Synthetic RMBS
  • Links between synthetic ABS and the market for credit derivatives
  • How credit derivatives work -- and how they are priced
  • Alternative forms of CDS and credit options
  • Credit-linked notes
  • Funded and partially funded synthetic CDOs
  • Case study: Leveraged Loan Synthetic Securitisatoin. Analysis of the structure, pricing and risks of a synthetic CDO with a super-senior tranche.
  • Credit and regulatory issues relating to synthetics
  • Team excercise: Allied Irish Bank. Using the techniques of securitisation, how would you structure the credit rislk transfer for this bank?

Asset-Backed Commercial Paper

  • Single-name versus multi-name ABCP
  • ABCP conduits
  • Applications of the flexible conduit structure
  • Case study: Thekwini. How did the sponsor of this residential mortgage conduit deal with the funding mismatch?


Case studies
Finance Co. Bhd
Ford Motor Credit 2006
Thekwini ABCP
Noname Bank Synthetic CLO
Allied Irish Bank

How to Get an ABS Rating
Collateralized Loan Obligations
SA Mortgage Model

Workshop Instructor
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 Director of International Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The author of more than fifty articles on international finance, Dr Giddy has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous financial institutions and corporations in Europe, North America, the Middle East and Asia. He has lectured in more than forty countries, and has been involved in the asset-backed securities market for over 15 years. 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 securitisation in Asia, and The Hudson River Watertrail Guide. He and his wife are the founders of Cloudbridge, a nature reserve in Costa Rica. | | | | contact
Copyright ©2007 Ian Giddy. All rights reserved.