SECURITISATION

Presented by

Sujina Ummar J
 MEANING
• Securitization is conversion of existing or
future cash flows into tradable securities.
• It is the process by which financial assets such
as loan receivables, mortgage backed
receivables, credit card balances, hire
purchase debtors , lease receivables, trade
debtors etc.. are transformed into securities.
•
 DEFINITION
• The process of liquefying assets comprising
loans and receivables of a financial institution
through issuance of negotiable certificate to
potential investors.
The parties of securitization involves six basic
parties namely
1.The originator
2.Special purpose Vehicle(SPV)
3. Obligators or Debtors.
4. Credit rating agency.
5. Servicing agency or administrator or Servicer.
6. Investors.
 Steps of securitization transaction
1.Transfer of assets
2. Issue of pass through certificates.
3. Credit rating.
4. Timing of the issue.
5. Payment.
6. Collection.
7. Credit enhancement.
 Securitization of Debt(loan assets)
• Steps
1. Packaging of the long term loans.
2. Offering packaging to investors.
3. Selected\approved investors have liquid funds.
4. Long term loans are distributed among the selected investors
and the reverse fund flows liquidate the term loans.
5. The investors are given coupons or pass through investors(PTCs).
6. Investors can also be given marketable securities through special
purpose vehicles(SPVs)
7. Prorata distribution of amount of loans recovered among the
coupon holders as mentioned in issuing document.
 ADVANTAGES
1.Release of locked-up funds.
2. Cost of funds is reduced.
THANK YOU