A step-by-step guide to implementing and closing securitization
transactions
Securitization is still in wide use despite the reduction in
transactions. The reality is that investors and institutions
continue to use this vehicle for raising funds and the demand for
their use will continue to rise as the world’s capital needs
increase.
The Mechanics of Securitization specifically analyzes and
describes the process by which a bank successfully implements and
closes a securitization transaction in the post subprime era. This
book begins with an introduction to asset-backed securities and
takes you through the historical impact of these transactions
including the implications of the recent credit crisis and how the
market has changed.
* Discusses, in great detail, rating agency reviews, liaising
with third parties, marketing the deals, and securing
investors
* Reviews due diligence and cash flow analysis techniques
* Examines credit and cash considerations as well as how to list
and close deals
* Describes the process by which a bank will structure and
implement the deal, and how the process is project managed and
tested across internal bank departments
While securitization transactions have been taking place for
over twenty-five years, there is still a lack of information on
exactly how they are processed successfully. This book will put you
in a better position to understand how it all happens, and show you
how to effectively implement an ABS transaction yourself.
Inhoudsopgave
Foreword xi
Preface xv
Part One Introduction to Securitization 1
Chapter 1 Introduction to Securitization and Asset-Backed Securities 3
The Concept of Securitization 4
The Process of Securitization 7
Securitizing Mortgages 14
ABS Structures: A Primer on Performance Metrics and Test Measures 18
Securitization: Features of the 2007-2008 Financial Crisis 24
Summary and Conclusions 33
References 34
Chapter 2 The Securitization Market Post-2007 35
Market Observation 35
Impact on Rating Agencies 40
Summary and Conclusions 42
Part Two Guide to Closing a Securitization Transaction 45
Chapter 3 Structuring and Execution of a Transaction 47
A Securitization Process 47
Summary and Conclusions 69
Chapter 4 The Rating Agency Process and Legal Review 71
Select Rating Agencies 71
Undertaking Legal Due Diligence 73
Begin Drafting Documents 78
Set Up the SPV 82
Modeling the Transaction 85
Determine Capital Structure/Trigger Levels 90
Prepare Marketing Materials 96
Pricing, Close, and Settlement 98
Summary and Conclusions 99
Chapter 5 Static Synthetic CDO Cash Flow Waterfall Model 101
Summary and Conclusions 107
Part Three Transaction Closing Templates and Checklists 111
Chapter 6 Transaction Templates and Checklists 113
Red Sea Master Series Limited Structure Diagram 113
Underlying Asset Pool 113
Draft Term Sheet 120
Closing Process 126
Structuring Notes 127
Rating Agency Preparation and Questionnaire 129
Loan-Level Data: Rating Agency Checklist 138
Agenda for Rating Agency Site Visit 140
Legal Counsel Review 140
Form of Transfer Certificate 144
Investor and Rating Agency Presentation Template 147
In-House Credit Rating Mapping Chart: Lower and Upper Values 149
Rating Agency Presentation: Corporate Bank Origination Processes 149
Loan Transfer Schedule of Tasks 154
Loan Transfers, Accounting Movements 158
Sign-Off Document: Securitization Project 160
Securitization Testing: Finance Department 161
Accounting Process on Closing 166
EUR Junior Tranche Trade Ticket 167
Senior Tranche Trade Ticket 168
Internal Transfer Booking Process 169
Questions from Trustee, Paying Agent, and Services Provider 169
Summary and Conclusions 172
About the Authors 173
Index 175
Over de auteur
SULEMAN BAIG works with the credit structuring team at Deutsche Bank AG in London. He has extensive experience dealing with first-time issuers and has structured a number of securitization transactions (both agency and principal) in a variety of asset classes and jurisdictions. Suleman graduated with a degree in mathematics from the London School of Economics.
MOORAD CHOUDHRY is Treasurer, Corporate Banking Division at the Royal Bank of Scotland, and visiting professor in the Department of Mathematical Sciences, Brunel University. He is on the editorial board of the Journal of Structured Finance and a member of the editorial advisory board of American Securitization.
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