Asset Securitisation Training Course

This unique course provides a detailed practical guide to the opportunities and mechanics within Asset Securitisation. Reflecting the realities of a post credit crunch market, the course will help you learn:

• How to recognise the optimum internal and external conditions and how to capitalise on them
• The importance of creating the right product for the right market
• The mechanics of the securitisation process – from origination and structuring through to pricing and trading
• The essential risk management techniques to utilise in securitisation
• What exactly went wrong during the worst of the credit crisis
• Practical credit enhancement techniques, including a review of credit enhancement decisions in recent deals
• How the world of securitisation changed as a result of the credit crunch and how you can exploit opportunities in the new market environment
  
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Introduction: The State of Play and What Went Wrong

• The history and growth of securitisation
• Leveraged structures and inappropriate asset classes
• Modelling problems
• Examples of distressed deals
• Recent developments and trends in the market
  - who’s issuing what, for whom, and how
  - how the application of securitisation technology is changing
  - range of new asset classes and structures
• Standard deal technology

Review of Securitised Products

• Amortising loans
  - mortgage-related products (RMBS and CMOs)
  - automobile loans
  - commercial mortgages (CMBS)
  - student loans
• Revolving receivables
  - credit cards
  - lease receivables
  - trade receivables
• Royalties and annuity-type cash flows
  - payment structure of ABS deals
  - impact of pre-payments
  - evolving structures
  - early amortisation triggers
  - clean-up calls
• CDOs
  - cashflow CLO structures
  - synthetic CDOs
  - ABS CDOs

The Players, Their Contributions and Commitments

• Originator
• Issuer
• Arranger
• Lead manager
• Credit enhancement providers
• Legal advisors
• Trustees
• Paying agents
• Reference banks
• Liquidity provider
• Guaranteed investment contract provider
• Servicer
• SPV management
• Swap provider
• Rating agencies

Rationale for Securitisation: Benefits for Originator

• Maintenance of capital requirements
• Improving the balance sheet
• Asset/liability management
• Diversification of funding
• Credit risk management
• Reduced cost of funding
  - straightforward savings
  - gains from specialisation
  - benefits from tradable credit risk
• Liquidity
• Receivables management

Preparing for First-Time Securitisation: Creating the Right Internal Environment

• Effectively reviewing contracts for possible constraints
• Conducting a comprehensive analysis of systems
  - hardware and software capacity
  - backup and disaster recovery
  - manual systems
• Review of procedures for administration of arrears management and provisioning
• Developing ongoing policies for collateral
• Cashflow modelling and analysis of the asset pool
  - historical data required
  - correlation with economic cycles and receivables characteristics
• Managing customer relations in a securitisation programme Servicing Requirements

Servicing Agreements

• Third party and back-up servicing
• The importance of segregating cashflows
• The importance of managing cashflows
• Reporting on the performance on securitised assets to investors and credit enhancers
• Potential benefits from servicing charges

Funding the Assets: The Most Common Routes

• FRNs
• Conduit funding
• Asset Backed Commercial Paper (ABCP)
• Private placements
• Bank loans
• Combinations
• Cross border funding opportunities

Identification and Mitigation of Risks for The Various Parties Involved

• Forms of risk
  - credit risk
  - liquidity risk
  - interest rate risk
  - re-investment risk
  - currency risk
  - market risk
• Risk management techniques available
• Execution strategy

Credit Enhancement

• Reasons behind credit enhancement
• External sources with examples
  - guarantees and letters of credit
  - pool insurance
  - monoline insurers: surety bonds
• Internal sources with examples
  - subordination
  - over-collateralisation
  - excess spread
• Using the originator’s own credit standing
• Choosing the optimum: factors to take into account
  - cost
  - cash and capital constraints
  - investor preferences
  - moral hazard
• Analysis of credit enhancement decisions in recent deals – the logic behind them and their performance

The Rating Process

• The role of rating agencies and who they are
• Rating criteria and how this has changed since the credit crisis
• The benefits each different agency can bring
• Compliance with the rating agencies’ requirements
  - quality of assets
  - systems and procedures
• How to manage the rating process

Regulatory, Legal, Accounting and Tax Issues

• European and US regulatory issues
• Basel III impact for issuers and investors
• Structuring the SPV
• Effectively transferring or assigning the contracts
  - novation
  - equitable assignment
  - subparticipation
• Profit extraction
• Ongoing involvement
• Accounting objectives to be achieved
  - the on or off balance sheet decision
• Impact of IFRS on securitisation structures

Cashflow Modelling of Transactions

• What can be modelled and what cannot
• Collateral pool modelling – building the warehouse model
• Assessing default rates and rating migration
• Correlation assumptions and using Moody’s diversity score technique
• Modelling the cashflow waterfall

Exercise: Delegates will use Excel to build a cashflow waterfall model for a CDO structure

Attend this two-day intensive training course, dealing with the most up-to-date aspects of the securitisation process from the perspective of all parties involved and master:

• The motivation behind the decision to securitise, along with criteria for a suitable receivables pool.
• How to recognise the optimal environment for securitisation, including critical volume and the potential legal, accounting, tax and interest reat constraints.
• How to conduct comprehensive analysis of contracts and systems and to create the right internal environment.
• Getting the right instrument for the right market, the available distribution methods, the types of investor and the perception of asset-backed securities as an investment.
• The use of multi-seller conduits.
• Forms of risk and the available risk management techniques.
• Credit enhancement, external and internal sources and an analysis of credit enhancement decisions in recent deals.
• The rating process and how to manage it.
• The essential legal, accounting and tax issues