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The Mechanics of Securitization: A Practical Guide to Structuring and Closing Asset-Backed Security Transactions


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.




Part I: Introduction to Securitization

Chapter 1: Introduction to Securitization and Asset-Backed Securities

The concept of securitisation

The process of securitisation

Securitizing Mortgages

ABS Structures: A Primer on Performance Metrics and Test Measures

Summary and Conclusions


Chapter 2: The Securitisation Market Post-2007

Market Observation

Impact on Rating Agencies

Summary and Conclusions

Part II: Guide to Closing a Securitization Transaction

Chapter 3: Structuring and Execution of a Transaction

A Securitisation Process

Summary and Conclusions

Chapter 4: The Rating Agency Process and Legal Review

Select Rating Agencies

Undertaking Legal Due Diligence

Begin Drafting Documents

Set up the SPV

Modelling the Transaction

Determine Capital Structure/ Trigger Levels

Prepare Marketing Materials

Pricing, Close and Settlement

Summary and Conclusions

Chapter 5: Static Synthetic CDO Cashflow Waterfall Model

Summary and Conclusions

Part III: Transaction Closing Templates and Checklists

Chapter 6: Transaction Templates and Checklists

Red Sea Master Series Limited Structure Diagram

Underlying Asset Pool

Draft Term Sheet

Closing Process

Structuring Notes

Rating Agency Preparation and Questionnaire

Loan Level Data: Rating Agency Checklist

Agenda for Rating Agency Site Visit

Legal Counsel Review

Form of Transfer Certificate

Investor and Rating Agency Presentation Template

In-House Credit Rating Mapping Chart: Lower and Upper Values

Rating Agency Presentation: Corporate Bank Origination Processes

Loan Transfer Schedule of Tasks

Red Sea Loan Transfers, Accounting Movements

Sign-Off Document: Red Sea Securitisation Project

Red Sea Securitisation Testing: Finance Department

Accounting Process on Closing‏

EUR Junior Tranche Trade Ticket

Senior Tranche Trade Ticket

Red Sea Form of Transfer Certificate

Internal Transfer Booking Process

Legal Review of Underlying Loan Assets

Questions from Trustee, Paying Agent and Services Provider

About the Authors