Asset Backed Securitization

PresentersMuhammad Imran FayyazJunaid Ahmed

Agenda

Asset Backed Security

An Asset-backed security is a financial security whose value and income payments are derived from and

collateralized by a specific pool of underlying assets.

Financial Security

A fungible, negotiable instrument representing financial valueand includes;

Structure of Asset-Backed Securities

High Credit rating

Normally AAA Rating

Low yield due to higher rating

Low rating compared to Class A

High Yield due toLower rating

Lowest or no Rating

Usually retained By issuer or Sponsor

Highest return

Principal payment structures of ABS

Types of ABS according to principal payment method

Key Features of an Ideal Asset-Backed Instrument

ASSET_BACKED SECURITIZATION PARTIES AND PROCESS

Parties in Securitization

Originator

Special Purpose Vehicle

A special purpose vehicle is a legal entity created to fulfill a narrow or specific or temporary objects.

Characteristics of Special Purpose Vehicle (SPV)

Uses of SPV

Key features in a desired SPV

Misuse of SPV

Enron Scandal 2001

Tower Financial Scandal

Underwriter

Credit enhancers

• Over collateralization• Subordination

Dealer

Benefits of Securitization

Credit enhancement Providing services

Sale of securitized receivables

Notional Principle of Bonds

Fixed rate Coupon Payments

Short title and commencement

Definitions

Commission means securities and exchange commission

Commission

Includes all such receivables against which income may accrue at a future date

Future receivable

Investor is a person holding any asset backed securities issued by special purpose vehicle

Means document containing information on a security calculated to invite offers

Investor

Offering document

Ordinance

Ordinance means Companies Ordinance 1984

A person transferring Future receivables to a Special Purpose Vehicle

Originator

A process whereby a SPV issues TFCs or other instruments to make payment to originator

and own the title of future receivables

Means a SPV registered by the commission for the purpose of Securitization

Securitization

Special Purpose Vehicle

Eligibility for Registration

Eligibility for Registration

No director, officer or employee of such person has been

Eligibility for Registration

Promoters, Directors and Trustees, in opinion of Commissioner are;

Registration

Cancellation of registration

Conditions of Operation

No SPV shall ;

Obligations of SPV

Advertisement and Invitation