- resources in finance

TII Kuwait

Securitization 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 as well as developed countries. This course provides a brief insight into the techniques of securitization and structured credit risk transfer. In addition to covering new developments in collateralized debt obligations, the course explains consumer finance securitisation and related topics. It explains risk transfer using synthetic asset securitisation, a versatile and fast-growing technique in the ABS market. The couse offers 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?
  • What is special about consumer finance securitization?
  • 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?

Securitization 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 securitization? Is it a true sale? Is the SPV independent?
  • Pool analysis, structure analysis, and determinants of credit risk
  • The technique of credit enhancement

Consumer Finance ABS: Risk Assessment and Credit Enhancement

  • Pool analysis, structure analysis, and determinants of credit risk
  • Consumer finance securitisation
  • Case study: Red and Black. How do these work? What is the credit exposure? What happens when credit deteriorates?
  • Counterparties and servicer risk
  • Interest rate and liquidity risk
  • The technique of credit enhancement
  • Case study: Chase Credit Card Securitization. How would you assess the credit risk in this deal? What are the other risks? What protections do investors have?
  • Rating agency analysis: stress testing approach
  • Application: Madras Appliances: post-acquisition ABS

The Rating Agency Process

  • What ratings mean in the ABS world
  • Models rating agencies use
  • The technique of credit enhancement
  • How to structure the credit enhancement for an ABS
  • Using ratings loss tables to structure credit enhancement in ABS
  • Developing a senior-sub model
  • Analysis of a portfolio with a rating agency model
  • Getting a rating: sequence and requirements
  • Application: FleetLease Turkey

Special Applications: ABCP, CDOs and Synthetics

  • Asset-Backed Commercial Paper
  • Special role of bank in ABCP
  • Where can TII use ABCP?
  • Classic ABS vs Collateralized Debt Obligations
  • Cash flow versus market value CDOs
  • CDO credit enhancement and ratings
  • Case study: Atrium. What are the assets in this CDO deal, and how are they funded?
  • Rating CDOs: factors considered by the rating agencies
  • Tiering the liabilities of a CDO
  • CDO pricing and cash flow analysis
  • Using ratings loss tables to structure credit enhancement in ABS
  • What are "synthetic" ABS?
  • Synthetic ABS and the market for credit derivatives
  • How credit derivatives work -- and how they are priced
  • Funded and partially funded synthetic CDOs
  • Case study: 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

Summary and Conclusions

Case studies
Finance Co. Bhd
Ford Motor Credit 2006
Red & Black
Chase Credit Card ABS
Madras Appliances ABS
FleetLease Turkey
Noname Bank Synthetic CLO

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.