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4-Securitization of Debt
4-Securitization of Debt
4-Securitization of Debt
Introduction
Introduction
Theme of Securitization
Definition
Process of Securitization
Originators
Servicers usually the originators or their affiliates
Merchant Bankers role of Underwriter in public offering, role
of Agent in private placement, Structuring the transaction and
Placing the securities for a fee
SPV (ie) Issuer Performs the tasks like being an intermediary,
pooling of receivables, holding of assets of investors and
issuing its own securities, issuer from the investors point of
view and bankruptcy remote transfer.
Credit Enhancers usually provided by the SPV (Issuer) or
third party in form of LC from a bank or issuance bond from a
firm with high credit rating
Rating Agencies
Trustees intermediary between the servicer and investors and
credit enhancer and investors
Benefits of Securitization to
Originators
Liquidity
Reduced
Cost of Capital
Profitability
Risk Stripping
Higher Capital Turnover
Avenue of Investment
Diversified Risk
Better Rate of Return
in Transactions
Promotes Savings
Promotes Socialism over Capitalism
Less Importance to Banks & NPAs
(Demerits)
Securitization Markets
Securitization Markets
Securitization in India
Securitization in India
Duty
Taxation
Accounting Rules
Eligible Investors
Lack of sophisticated Debt Market
Lack of Investor Awareness and Risk
Appetite
in Legal Framework
Duty
Development of Institutional Back-up for
Liquidity and Rating