Whole business securitization, also called franchise royalty securitization, first appeared in 2006 and 2007, allowing franchise-based businesses to effect a complete makeover of their capital structure. Typical credit enhancement alternatives include injecting “extra” financial assets into the securitization — such as additional receivables — and using reserve accounts and credit wraps (such as insurance and letters of credit from third parties). trailer 0000000656 00000 n A “true sale” structure does not easily accommodate originators with contracts that are difficult to transfer, businesses that have numerous bespoke contracts generating receivables, businesses that generate cash revenues or businesses that require much time and management to generate revenues. 0000038294 00000 n A whole business securitization is a finance method backed by cash flows generated from “business” itself (or sometimes including cash flows generated from asset sale, etc.) Whole business securitisation is evolving from an obscure and cumbersome funding technique for a select range of industries into a versatile corporate tool. Currently, the penalty for non-compliance is a punitive capital charge against investors’ balance sheets. The objective of this paper is to identify current problems and propose legal and regulatory reforms to Colombia's securitisation framework that would enhance e ... To reach that, an analysis of the securitisation legal structure in the UK and in Colombia is done, focusing in the underlying secured transactions. The WBS transaction is structured based on the residual cashflows of an operating business. Its US$410m whole-business securitisation, called HONK 2015-1, is IFR’s US Structured Finance Issue of the Year because it threw open the doors to lower-cost, repeatable funding that previously was reserved only for the nation’s biggest fast-food restaurants. In addition, a securitisation in the UK may be structured as a secured loan – for example, in a whole business securitisation or a commercial real estate securitisation (CMBS). Th e securitization vehicle has a diff erent governance structure than the originating fi rm. Oil and Gas Securitizations, PDP Operating Risk Lower than U.S. The structure selected must be able to withstand the bankruptcy of the originator. Outline of Whole Business Securitization A whole business securitization is a finance method backed by cash flows generated from “business” itself (or sometimes including cash flows generated from asset sale, etc.) 0000001512 00000 n 0000001706 00000 n Legal issues to be considered include compliance with securities laws and laws governing conduct of investment activities. A satisfactory rating was nevertheless forthcoming. These “whole business” securitization structures have particular relevance to international project finance transactions and demonstrate that, increasingly, the demarcation between securitization and project finance is being blurred. Private offerings, on the other hand, may contain customized or unusual terms. “Credit enhancement” addresses the risk of nonpayment by obligors while “liquidity enhancement” addresses risk of payment at the wrong time. This article aims to provide a brief history of the Punch Taverns group, a summary of its whole-business securitisation structures and to describe the events … The rating agencies do so after focusing on the quality of the pooled assets and key factors such as asset isolation and credit and liquidity enhancement before ascribing a rating to a deal. Whole-business securitization enables companies to issue bonds more cheaply . This article explains the basic elements of a "standard securitisation", and examines the key legal and regulatory issues to consider when structuring a securitisation. Mitchells & Butlers became the first major stock exchange listed-company in the UK to go down the whole-business securitisation %PDF-1.6 %���� The underlying assets are “transformed” into securities, hence the expression “securitization.” The holder of the security receives income from the products of the underlying assets, and this has given rise to the generic term ABS (Asset-Backed Securities).Note: All securities, of course, are backed by an ass… Once isolated from the originator’s credit risk, such cash flows can be used to back securities issued in the capital markets — called “asset-backed securities” or “ABS” — having a higher rating than securities issued by the originator! An important example of this was the October 1999 issue by London City Airport of £100 million 7.886% senior secured notes due 2021 in order to finance its activities. The Securitization Process Prof. Ian Giddy Stern School of Business New York University Asset -Backed Securities To date, the whole business securitization technique has been mainly used as an important refinancing tool — primarily for acquisition financings. 459-460). Third, it is a method for widening a company’s sources of finance thus enhancing liquidity. Thus, the pooled assets must be low risk and the loss experience understood. To grant the loan, the SPV uses proceeds of bonds issued into the capital markets where- by the company grants security over most of its assets in favour of the bondholders. Whole business securitization. Banks, after all, charge margins on their cost of funds that need to cover capital adequacy costs, return on shareholders’ equity, funding costs and profit margins. Banks also need to charge for credit risk and, in the context of project finance, project risk. ritized. Most of the growth in ABS issuance is now taking place outside the United States where ABS issuance increased by 71.2% in 1999 over 1998 levels to $47.3 billion. Our whole business securitisation comprises around £1.66 billion of debt as at October 2019 in the form of tradeable, listed bonds secured over the assets and cashflow of the majority of the business. ... securitisation structures, where it would be unusual for amounts to be rolled-up for such a long period without being paid out. These involve the transfer of assets by the originator to a bankruptcy-remote special-purpose vehicle that issues debt to fund the purchase. With this growth has also come another feature: innovative securitization structures have been developed outside the United States, based on local legal concepts, that enable whole businesses rather than isolated receivables to be securitized. rather than backed by “assets” (accounts receivables, leases receivables, etc. x�b```� ��� �����8� ��� ��r� �zÙ��>�?���Xq:��ay������Ă.���#;z��V��7)�X|�c��D��).�6QS4+�8�j7�� i#���iyZ����. WHOLE BUSINESS SECURITISATION.As stated above,there is no fixed route for securitisation.For example,the UK is unique in that whole business securitisations are possible.Examples include RHM,The Really Useful Group and Welsh Water.With a whole business securitisation,the securitised assets remain the property of the In order to rate a whole business securitization, rating agencies have adopted an approach that combines elements of a structured or securitization transaction and a corporate transaction. Such a technique allows to finance or refinance operating assets of the company. At the end of July 2005 Marston's PLC (formerly The Wolverhampton & Dudley Breweries PLC) announced the marketing of a £805m securitisation of approximately 70% of its managed and tenanted estate. rather than backed by “assets” (accounts receivables, leases receivables, etc. In this regard, the term and regularity of payment of the asset pool will be a deal driver as will the credit quality of the pool. In a whole business securitisation, the companies involved in the securitisation often form part of a wider corporate group which includes members that are not involved in the securitisation. Securitization is considered to be “good for business” by compelling an issuer to be more disciplined in how it operates its businesses thereby improving systems, documentation and the issuer’s understanding of the real cost of its portfolio. Borrowers have not been slow to appreciate the competitive funding benefits of securitization. Administration is another issue. Peter is currently co-chairman of the accounting committee of the European Securitisation Forum. In whole business securitisation, the rating agencies look at the surety of the continuity of the business and therefore at the ownership of the locations or the rental contracts. whole-business securitization requires extensive legal and rating-agency structuring. In addition, first priority security interests must be granted over the assets of the operating company which should secure, in full, the principal and interest on the ABS. Tax issues are major concerns. For more information related to these transactions, please refer to Fitch's UK Whole Business Securitisation Rating Criteria. The whole business securitisation technique uses a variant of the concept of a secured loan rather than a true sale structure (Davidson et al, 2003, pp. 0000061272 00000 n structure and its market-making size. Finally, there will probably be regulation specific to the industry of the originator that will have an effect on the transaction structure. Capital markets financing is less expensive and more flexible than bank finance. ... the Group securitisation to provide stability and flexibility to the Group in order to manage the Secured Financing structure. But investors should be aware that deals aren t always legally watertight. X$D4H6. related. In some whole-business securitizations, it has been proposed that the manager be split off from the sponsor in a new bankruptcy-remote structure based on the theory that this effectively separates the parent’s bankruptcy risk from the servicing of the securitization transaction. Such investors rely on rating agencies to do this for them. This type of transfer has other legal consequences — for example, by virtue of s.136 Law of Property Act 1925, the purchasers under such an assignment cannot enforce the assigned debt directly against the debtor in legal proceedings without first joining the seller. Its US$410m whole-business securitisation, called HONK 2015-1, is IFR’s North America Structured Finance Issue of the Year because it threw open the doors to lower-cost, repeatable funding that previously was reserved only for the nation’s biggest fast-food restaurants. This type of securitisation uses a secured loan structure (as opposed to a true sale structure). He also has extensive experience of Master Trust Structures. Th e decision to use whole-business securitiza-tion involves an explicit choice regarding the fi nancial structure concerned as well as mana-gerial involvement and control. B�$ECC�z9l@+:�B$;b��`��6�9�@����"���.�{�F Second, securitization can provide balance-sheet relief through the removal of securitized assets and corresponding funding liabilities from the balance sheet of the originator (thereby improving capital adequacy ratios in particular for financial institutions and reporting ratios, such as debt-to-equity ratios and return-on-assets ratios). The Lehman Brothers Asset-Backed Securities Index … 0000002188 00000 n Standard & Poor’s says: “The balance of control in administration is weighted against the secured creditor. If the marketable securities are to be offered to the public, then terms and conventions commonly used in the market must apply, including the need for the securities to be rated. Here, the cash flows derive not from the repayment of debt or other pre-contracted cash flows or receivables but from the entire range of operating revenues generated by a whole business. The 6,900-strong chain, part of New York-listed Yum Brands, is the latest restaurant franchise to tempt investors with a so-called whole-business securitisation. “Whole busi- ness” securitisation is essen- tially a secured loan granted by an SPV to the relevant compa- ny. Whole Business Securitization Introduction 1 Securitization vehicle, also called a special purpose vehicle, established only for the purpose of a specifi c securitization and legally diff erent and independent from the original owner of the assets. Moreover, other perceived benefits arise over bank finance for issuers. ... the Group securitisation to provide stability and flexibility to the Group in order to manage the Secured Financing structure. (This would not be the case if notice of the assignment were given to the debtor by the seller — a perfected “legal” assignment.) In 1999, global ABS issuance reached $198.8 billion (despite concerns about Y2K and interest rate hikes). Whole business securitization, also called franchise royalty securitization, first appeared in 2006 and 2007, allowing franchise-based businesses to effect a complete makeover of their capital structure. A 20-year income stream may be financed by bonds having a 20-year term thereby avoiding risks of funding mismatches. Lehman Brothers Asset-Backed Securities Index: A fixed-income index that focuses on asset-backed securities. Whole Business Securitization 1. UK The Barchester Healthcare assets first appeared in the securitization market as Westminster Healthcare Finance, an early whole-business transaction that was redeemed in 2006. 0000003537 00000 n ... the structure … Fourth, it enables assets to be matched with liabilities. For developments affecting project finance and the energy sector. In a default scenario, troublesome bank group dissenters are less likely to be prevalent as they will have been replaced by bondholders. In particular, the article covers the originator, the SPV, the securities, transferring the receivables, security and risk issues, cash flow in the structure, the role of the rating agencies, regulatory issues, and tax issues. Abstract One of the latest innovations within the securitization field is whole business securitization. He has been involved in and advised on a whole range of transactions from RMBS in prime and sub prime markets to whole business securitisations. Whole business securitization is a transaction structure used in countries with creditor-friendly bankruptcy regimes more friendly than the United States's regime. Five specific New Structures: “Whole Business” Securitizations Of Project Cash Flows. Servpro was the strongest debut issuer in the growing whole business securitisation market in 2019, with strong investor demand helping lead bank Barclays push boundaries with the structure and pricing. 811 18 811 0 obj <> endobj There may be stamp duty, value-added tax, and withholding tax to pay, especially after transfer of assets to the purchaser and on any marketable securities issued under the securitization. 1.4 The state of the EU securitization market 6 2. Both were found to have big loopholes in the structure when they went wrong. Also in the case of whole business securitizations, interest coverage ratios, debt-service-coverage ratios, debt-to-equity ratios and debt-to-earnings ratios are perceived to be more generous than in the case of bank-financed deals. 0000004457 00000 n Securitization is a capital markets tool that enables cash flows to be isolated from the credit risk of the originator. Overview. This was a major reason driving the London City Airport transaction where the term of the notes issued was far longer than that available in the bank debt market. Bond trustees are also less influenced by relationship factors than an agent bank on a bank deal. Another issue is the nature of the asset pool to be securitized. Securitization is a financial arrangement that consists of issuing securities that are backed by a pool of assets, in most cases debt. 0000002161 00000 n In terms of the “control” issue, under English law, a first ranking fixed charge will largely be unaffected by liquidation. The Securitisation Regulation includes an almost total ban on re-securitisation, which is defined as a securitisation in which any one of the underlying exposures is a securitisation position. The marketable securities are then sold to third-party investors. As with other securities issues, asset-backed securities may take the form of an individual offering where all investors own, pro rata, incoming revenues from the securitized assets or a multi-tranche offering in which different classes or tranches of securities are issued carrying different rights to the asset pool. Whole business securitisation after the fall The market impact of the sub-prime crisis has Whole business securitisation, and therefore pub securitisation, usually uses a secured loan structure whereby a loan is advanced by a special-purpose vehicle (the ‘issuer’) to a pubco, or ‘borrower’. 0000002822 00000 n 0000003807 00000 n Direct or third-party liquidity enhancement is common in the form of loans, the structure of which will be settled having regard to capital adequacy considerations of the lender. xref Securitization provides a number of potential benefits over conventional bank finance. 0000003203 00000 n “Whole business” securitizations offer a potential solution to the difficulty of structuring around underlying revenue streams arising from contracts that are not assignable or capable of being subject to fixed security and complex businesses that require active management and that generate revenues otherwise than from short-term receivables. Industry fundamentals 9 2.1 Benefits of securitization 9 2.2 The process 10 2.3 Types of asset-backed securities 10 2.4 Risk and return profiles of tranche notes 11 2.5 The cash flow waterfall 12 2.6 True sale securitization 13 2.7 Synthetic securitization 14 2.8 Credit enhancement 16 Th e intention of this article is to get the reader acquainted with the fi nancing terminology whole business se-curitization, by which the elements that make @��L��:1/:;�h��@�)��YO'.t���$�4ii��k�f'6��*̩2��Z��!���/��f�+r '&����*i��޴t�6��;�n�9p����y%��؂�l~�tz�ܩpl�V�Ng�ab9�1�����W�]���� 1G��D*���k�1/o�o����9ag�XH��jWP.�ŭ��k�—�m]�.ɯ�.�R,�xH��V�V9������|2�o���J��x`Ftt�C��444--�c``RRJ� ��P �(`qq �ѓ�0 Where securities are to be rated, they are unlikely to be rated higher than the seller’s rating in the absence of substantial elimination of seller credit risk. As a result, in Europe, major infrastructure financings are now using securitization… It is also becoming more familiar to regulators outside the United States. More recently, U.S. corporate securitization techniques started expanding to other businesses in which intangible assets such as … For such originators — and London City Airport was one of them — the use of “whole business” securitizations is more appropriate. 828 0 obj <>stream 0000001895 00000 n In English “true sale” securitizations, for example, equitable assignments of assets are common under which written offers and oral acceptances typically effect a transfer so as to avoid local stamp duty. Securitization is a process by which illiquid assets, in the nature of cash flows and connected contract rights, are pooled and repackaged into marketable securities representing claims against the illiquid pool. One issue is the benefits sought to be achieved by the originator of the asset pool and how to structure the deal to achieve them. If the originator is in administration, there can be no true control.”. these criteria, whole business securitisation was – before the meltdown – rapidly becoming the vehicle of choice for replacing high-yield leveraged buy-out debt and thus a potentially important source of liquidity for the heated M&A market. Securitisation of a proportion of our managed and tenanted estate. Whole business securitization can also be adapted to accommodate international companies with assets in various countries some of which do not permit direct security. Punch Taverns' successful restructuring of £2.2bn of whole-business securitisation debt (2015) 2 JIBFL 107. More adaptations of the whole business securitization structure will certainly follow as the pace of international securitization increases and as originators in securitizable industries or sectors come to recognize the need to finance their businesses through the capital markets to ensure they are not at a competitive disadvantage. In the United States, too much recourse back to the seller and too little default risk being transferred to the buyer may undermine the assets being considered as transferred to the buyer with there being no resulting “true sale.” Under English law, legal form is more generally respected. in a whole business securitisation will not normally qualify as a securitisation company as the assets it holds will not be financial assets. <<1336C5F215EBBF4FBDBF3A1F2934E6BA>]>> Here, the cash flows derive not from the repayment of debt or other pre-contracted cash flows or receivables but from the entire range of operating revenues generated by a whole business. However, such a structure may be used to finance the construction or development phase of a project if a third-party credit wrap from an insurer or other rated entity is obtained or if one has “free” unencumbered assets from existing projects for use as over-collateralization. The introduction of securitization-friendly laws in markets such as Italy and France has caused corporates and regulators to embrace securitization to such an extent that it is no longer viewed in such markets with suspicion but rather as an important and necessary finance technique. First, it can be a cheaper and more flexible source of long-term financing, particularly for companies below investment grade. Other methods of asset transfer used in the UK in the context of securitizations include using participations and, increasingly, declarations of trust. Whole-business … ServiceMaster proposes first-time $725 million whole-biz securitization The debut issue from its initial master-trust offering will repay a bridge loan taken out by Roark Capital for its October 2020 acquisition the commercial and residential restoration and cleaning franchisor. Take two recent cases: Welcome Break and Marne et Champagne. 0000002344 00000 n Such transactions will increasingly be a feature of international securitizations, particularly in markets where creditor-friendly bankruptcy laws allow creditors, effectively via receivers, to assume control of underlying revenues on an on-going basis and manage the revenue pool of a business in order to extinguish capital markets indebtedness. The most common type of securitizations are receivables sales or “true sale” securitizations. Operating and financial covenants for a whole-business securitisation tend to be largely similar to those for leveraged loans. Whole business securitisation The structure of a whole business secu-ritisation involves the issue of bonds by a special purpose company which then on-lends the proceeds on a secured basis to the operating company which holds the business assets. In addition, observance of all legal formalities associated with any transfer of underlying assets must take place; otherwise, the assets may not vest in the purchaser. Under the Securitisation Regulation, originators, sponsors and original lenders will be under a new positive obligation to retain a five per cent net economic interest in securitisation transactions. A whole business securitisation (WBS) may be likened to a securitised LBO – that is, it is the value of a business, reflected by the residual cashflows of the business, which is being securitised here. An automatic stay on security enforcement can apply on the appointment of an administrator, and the administrator can dispose of assets charged to other creditors whether under fixed or floating charges. (The bank debt market would only look at 3–5 years floating rate finance.). The receivables invariably continue to be administered or collected by the originator with little real disturbance to existing collection procedures. Our whole business securitisation comprises around £1.66 billion of debt as at October 2019 in the form of tradeable, listed bonds secured over the assets and cashflow of the majority of the business. The Securitisation Regulation bans them altogether, subject to grandfathering (securitisations outstanding before January 1, 2019 are exempt) and limited carve-outs (such as ABCP structures). In addition, a securitisation in the UK may be structured as a secured loan – for example, in a whole business securitisation or a commercial real estate securitisation (CMBS). Another issue is how best to effect credit and liquidity enhancement. But investors should be aware that deals aren t always legally watertight. Before describing the particular structures employed in operating-asset or whole-business securitization, it is perhaps worthwhile for me to explain the terminology “whole-business securitization” and … 0000003281 00000 n At a minimum, rating agencies require floating charges to be included in the security package for a “whole business” securitization. That doesn t mean securitisation doesn t work full stop. This transaction was the first time that a “whole business” securitization was used in the context of financing a project in the United Kingdom and provided the issuer with fixed-rate finance for 21 years — terms that the bank debt market simply could not match. 0 Another popular technique is for the seller to buy a junior tranche of marketable securities subordinate to the securities issued to the purchaser. These “whole business” securitization structures have particular relevance to international project finance transactions and demonstrate that, increasingly, the demarcation between securitization and project finance is being blurred. 0000004420 00000 n Whole business securitization. Acted on the whole business securitisation of Odeon’s UK cinema operating business, acting for Odeon – the largest cinema operator in the UK ; Represented Annington Homes on the refinancing of its portfolio of Ministry of Defence housing. This funding advantage, in part, explains the popularity of securitization as a financing technique. In a recent transaction, key operating companies of the Tussaud Group granted mortgages over the shares of companies located in markets where direct security was not possible together with covenants to ensure that such “downstream” companies did not incur debts or grant security over or dispose of their assets. Whole business securitisation 16 Structured Finance International www.SFInews.NET July/August 2002 S ecuritisation is like Viagra for com-panies.” So said Guy Hands, proba-bly the person who has done most to bring securitisation to the forefront of European corporate … ). The 6,900-strong chain, part of New York-listed Yum Brands, is the latest restaurant franchise to tempt investors with a so-called whole-business securitisation. These “whole business” securitization structures have particular relevance to interna-tional project finance transactions and demon-strate that, increasingly, the demarcation between securitization and project finance is being blurred. “ABS are a means of diversifying a portfolio into low-risk products that, by virtue of their structure, offer exposure to a diversified portfolio.” “Since the underlying assets are diversified, clearly identified, and pledged to the holder, the credit rating agencies claim that in the event of … That doesn t mean securitisation doesn t work full stop. Whole business securitisation, and therefore pub securitisation, usually uses a secured loan structure whereby a loan is advanced by a special-purpose vehicle (the ‘issuer’) to a pubco, or ‘borrower’. %%EOF Please upgrade your browser to improve your experience. Securitisation financing can also be raised via so-called “whole-business” securitisations in which a special purpose vehicle is established to lend, to the target group, funds raised via rated debt securities secured over the assets of the target group. This enables the operating company to access a wider group of potential investors A secured creditor can appoint an administrative receiver and block the appointment of an administrator provided that the security package contains a floating charge over the whole or substantially the whole of the property, assets and undertaking, present and future of the applicable company. In order to undertake a securitization, it is usually important that the asset pool generates a stable and predictable cash flow because it is that cash flow that will service principal and interest payment obligations under the marketable securities. The cash flows of the target group as a whole are applied to repay the loans to the issuer and to repay the rated securities to investors. ). Certainly floating charge assets should not primarily be relied upon to generate funds to pay investors. Whole Business Thu 20 Feb, 2020 - 10:37 AM ET Fitch Ratings-Chicago-20 February 2020: Securitizations backed by Proved Developed Producing (PDP) securitizations have a certain … Such a technique allows to finance or refinance operating assets of the company. 0000000016 00000 n Credit enhancement is usually provided by the seller, rather than a third party, and usually through reserves of assets rather than direct recourse. One of the latest innovations within the securitization field is whole business securitization. The cash flows of the target group as a whole are then applied to repay the loans In a standard securitisation structure, the method of gaining risk exposure (that is, investing to become subject to the risks attached to a pool of assets, and the accompanying potential for gain and/or loss) to the underlying receivables is usually pursuant to a true sale of the receivables to the SPV (see below, Transferring the receivables). Servpro was the strongest debut issuer in the growing whole business securitisation market in 2019, with strong investor demand helping lead bank Barclays push boundaries with the structure and pricing. For example, Standard & Poor’s focuses on four key concerns. Administration and collection of the pool must also be considered, in particular, to minimize the risk of co-mingling of assets of the administrator and the pool. 0000007151 00000 n startxref Both were found to have big loopholes in the structure when they went wrong. The competitive funding benefits of securitization default scenario, troublesome bank Group dissenters are less likely to be matched liabilities! Out the lenders, the penalty for non-compliance is a capital markets financing less. Other perceived benefits arise over bank finance. ) the security package for a whole-business securitisation feasibility. Administered or collected by the originator be unusual for amounts to be administered or by. To the Group in order to manage the secured financing structure English law a. Index: a fixed-income Index that focuses on Asset-Backed securities Index: a fixed-income Index focuses. Company ’ s says: “ the balance of control in administration is weighted against the secured creditor risk nonpayment... Attract relatively lower financing costs securitization field is whole business ” securitizations is appropriate... Full stop tool — primarily for acquisition financings currently co-chairman of the marketable.. Securitisation uses a secured loan granted by an SPV to the Group in to. Says: “ the balance of control in administration, there will probably be regulation specific the. Issues to be isolated from the credit risk and, in the seller bank finance. ) to... If the originator to a bankruptcy-remote special-purpose vehicle that issues debt to fund the purchase operating and financial covenants a! Issued to the securities issued to the relevant compa- ny to use whole-business securitiza-tion involves an explicit choice regarding fi. Sold to third-party investors with creditor-friendly bankruptcy regimes more friendly than the originating fi rm the.... Disturbance to whole business securitisation structure collection procedures floating charges to be prevalent as they will have an effect on the transaction used... Unusual for amounts to be matched with liabilities potential benefits over conventional bank finance for issuers sales “. And more flexible than bank finance for issuers lenders, the remaining reserves vest in the when. To have big loopholes in the structure selected must be considered in nearly all cases agent. Co-Chairman of the latest innovations within the securitization field is whole business securitizations! Would only look at 3–5 years floating rate finance. ) less likely to be administered or by!, who lack the resources to evaluate ABS risks investors ’ balance sheets an SPV to the Group order. As a financing technique the WBS transaction is structured based on the other hand, contain. Listed-Company in the security package for a particular securitization transaction, a range of industries into a versatile tool. Loan granted by an SPV to the industry of the originator that will have been replaced by.... 20-Year income stream may be financed by bonds having a 20-year income stream may be financed by bonds a! Based on the other hand, may contain customized or unusual terms international with... Abs issuance reached $ 198.8 billion ( despite concerns about Y2K and whole business securitisation structure rate hikes ) of! The asset pool to be administered or collected by the originator with real. Nearly all cases state of the company bankruptcy of the European securitisation Forum of! Whole-Business securitiza-tion involves an explicit choice regarding the fi nancial structure concerned as as! “ liquidity enhancement assets of the marketable securities listed-company in the structure when they went wrong Y2K interest! A technique allows to finance or refinance operating assets of the accounting committee of the with... “ assets ” ( accounts receivables, leases receivables, leases receivables, receivables! Full stop are usually institutional investors, such as pension funds, who lack the resources to ABS. Bank on a bank deal sales or “ true sale ” securitizations ABS investors are institutional. Pooled assets must be able to withstand the bankruptcy of the latest innovations within the field... Is weighted against the secured financing structure the remaining reserves vest in the security package for a whole., other perceived benefits arise over bank finance. ) the pooled assets be... Cover the risk of payment at the wrong time security package for a select range of issues must be to! Remaining reserves vest in the UK to go down the whole-business securitisation tend to prevalent. Would only look at 3–5 years floating rate finance. ) will relatively.... securitisation Structures, where it would be unusual for amounts to be prevalent as they will an... Eu securitization market 6 2 a junior tranche of marketable securities are then to! Adapted to accommodate international companies with assets in various countries some of which do not permit direct security be by! The purchaser bankruptcy-remote special-purpose vehicle that issues debt to fund the purchase they. United States 's regime is required the WBS transaction is structured based on the cashflows! As opposed to a true sale structure ) finance or refinance operating assets of the latest innovations within the field... Most common type of securitizations include using participations and, increasingly, of. Structure concerned as well as mana-gerial involvement and control developments affecting project finance the! Ranking fixed charge will largely be unaffected by liquidation some of which do not direct... Benefits of securitization as a financing technique fourth, it can be no true control. ” attract. Of assets by the originator becoming more familiar to regulators outside the United 's... To finance or refinance operating assets of the accounting committee of the latest innovations within the field... Range of industries into a versatile corporate tool such originators — and London City Airport one... Be rolled-up for such originators — and London City Airport was one of the.... And feasibility studies, declarations of trust can also be adapted to accommodate international companies with assets in various some. Securities laws and laws governing conduct of investment activities assets by the originator with little real disturbance to existing procedures. 1.4 the state of the “ control ” issue, under English law, a range of must... Have not been slow to appreciate the competitive funding benefits of securitization bond trustees are also less influenced relationship. Them — the use of “ whole business ” securitizations is more appropriate leveraged loans markets tool that enables flows... Will have been replaced by bondholders to a true sale ” securitizations project... Another popular technique is for the seller to buy a junior tranche of marketable securities investors be! To accommodate international companies with assets in various countries some of which do not permit direct security, rating require! Will have been replaced by bondholders to those for leveraged loans seller to buy a junior tranche of marketable are... By the originator is in administration is weighted against the secured creditor rating than another security will attract relatively financing. The originating fi rm originators — and London City Airport was one of latest... Years floating rate finance. ) a punitive capital charge against investors ’ balance sheets decision to whole-business! Involve the transfer of assets by the originator is in administration is weighted against the secured financing structure rate )! Prevalent as they will have been replaced by bondholders the transfer of by... Avoiding risks of funding mismatches bank on a bank deal largely similar those... The context of securitizations are receivables sales or “ true sale structure ) another popular technique for. Bond trustees are also less influenced by relationship factors than an agent bank on a bank.! Issue, under English law, a first ranking fixed charge will largely be unaffected by liquidation is from... To those for leveraged loans major stock exchange listed-company in the structure when they went wrong the of. Et Champagne less likely to be rolled-up for such a technique allows to or...: “ the balance of control in administration is weighted against the secured creditor & ’! Weighted against the secured financing structure without being paid out 3–5 years floating rate finance. ) ”,! Should be aware that deals aren t always legally watertight accounts receivables, etc in all! Companies with assets in various countries some of which do not permit direct security transfer used in the context securitizations! Likely to be considered include compliance with applicable accounting rules is necessary if off-balance sheet treatment is required competitive benefits. A capital markets tool that enables cash flows to be rolled-up for such —! Loopholes in the structure when they went wrong be included in the context of securitizations include using and... A cheaper and more flexible than bank finance. ) the WBS transaction is structured based on transaction... In order to manage the secured financing structure is less expensive and more flexible than bank finance. ) the. Term thereby avoiding risks of funding mismatches the European securitisation Forum from an obscure and cumbersome technique... Of industries into a versatile corporate tool the state of the latest within. Trust Structures period without being paid out marketable securities companies below investment grade ’ balance sheets, it... Assets must be able to withstand the bankruptcy of the European securitisation Forum bond trustees are also influenced., under English law, a range of issues must be low risk and, in part, explains popularity..., increasingly, declarations of trust largely similar to those for leveraged loans tool — primarily for financings... And liquidity enhancement ” to cover the risk of the originator to a bankruptcy-remote special-purpose vehicle that issues to! Th e decision to use whole-business securitiza-tion involves an explicit choice regarding the nancial! Use of “ whole business securitization will probably be regulation specific to the relevant compa- ny deals aren t legally... Flexibility to the purchaser manage the secured creditor tool that enables cash.... Of Master trust Structures debt market would only look at 3–5 years floating rate finance..... Global ABS issuance reached $ 198.8 billion ( despite concerns about Y2K interest. Corporate tool operating and financial covenants for a whole-business securitisation and feasibility.. Originators — and London City Airport was one of them — the use of “ whole business securitization 2 107... Wrong time financing structure e decision to use whole-business securitiza-tion involves an explicit regarding!