Download - Assessing ABS players table

Players (type) Contractual duties Item number or form

Basic disclosure Required documents Detailed Content

Originator/sponsors (mostly large financial institutions, commercial enterprises, big real estate companies & medium sized enterprises)

This entity initiates the securitization program for lower costs of borrowing, alternative source of borrowing and accelerate cash receipts

1104, prospectus, form abs 15-G, prospectus

Provide the following information about the sponsor State the sponsor’s name

and describe the sponsor’s form of organization

Describe the general character of the sponsor’s business

Securitization programo General discussion

regarding assets of any type

o Detailed discussion regarding assets of the type being securitized

o Size, composition and growth of relevant asset portfolio

o Other information material to analysis of the pool asset, such as prior securitization, early amortization or defaults

Describe the sponsor’s material roles and responsibilities in its securitization program

If applicable, disclose pool assets repurchase activity for all of the sponsor’s securitization

Agreement to transfer the receivables

Asset purchase & sale agreement or loan (consignment/pledge) agreement

Agreements to provide credit enhancement or liquidity support (if applicable)

Clean-up agreement Servicing agreement (if it

also acts as a servicer)

Must be clear Contains representations,

warranties and any criteria the receivables must satisfy

The SPV’s recourse and rights against the originator for breach of representation,, warranty or contractual terms by the originator

Originator’s obligation to repurchase any receivable not eligible at the representation

If the originator also acts as a servicer, it will be a provision giving the right to the originator to purchase all the remaining securities when it reaches a certain level

1 | Research conducted by Arthur Mboue

Debtor (any type of customers of the originator-each person liable for the full or partial payment or performance of any loan or debt whether such person is obligated directly, indirectly, primarily, secondarily, jointly or severally)

They are the originator’s obligors. Their credit scores and historic payment experience are nucleus to a success of the full ABS program. They do not need to be notified of, consent to the transfer of the receivables because they are not participating parties in the securitization program.Estimate of losses or allowance for losses requires consideration of historical loss experience adjusted for current condition and judgments about the probable effects of relevant observable data including present economic conditions such as delinquency rates for health of specific customers and market sectors, collateral values and the present and expected future levels of interest rates. The underlying assumptions, estimates and assessments used to provide for losses are updated periodically to reflect current conditions. These assessments are subject to regulatory examinations which can result in change to these assumptions or worse.

1112, prospectus, FWP, 10-D, 10-K

Provide information about each significant obligor and the nature of the obligation

For obligors that are not ABS issuers, provide information

o Summary financial information for 10% obligors

o Audited financial statement for 20% obligors

If the obligor is An issuing entity of ABS: the discussion requirement under items 1104, 1115, 1117, and 1119 of Reg AB applied

Bill Sale notice or sale

agreement Lease or rent contracts

Item number Warranty duration of buyer Price agreed on Agreed Installation payments

Investors (financial institutions, insurance companies, pension

Purchase the securities issued by the SPV

Receive interest and principal payments from

Prospectus, 1111

To enhance their knowledge of the ABS before any investment, investors would also rely on

Security purchase agreement

Security trust deed (certificate)

Index of stock purchase agreement

o Definitiono Sale and purchase of


funds, hedge fund and wealthy individuals)

the paying agent as scheduled

o State of Pool assetso Tax matterso Legal proceedings

Pool assets: Describe the pool assets with

a tabular representation of average pool to sales, average balance, weighted average coupon, average age, remaining term, average loan to value or simple ratio and weighted average standardized credit score or other applicable measure of obligor credit quality

o Describe the types of pool assets to be securitized

o Describe material terms of the pool assets

o Describe solicitation, credit granting

o Provide the method and criteria by which the pool assets were selected for the transactions

o The cut-off rate or similar date for establishing the composition of the asset pool, if applicable

o Identify briefly legal and regulatory provisions

o Provide the nature

Stock certificates Offering memorandum Investor qualification

questionnaire (for PPM) Subscription agreement Agreement to become a

party to shareholders

shareso Representation and

warranties of sellero Representation and

warranty of buyero Certain covenantso Conditions precedento Termination policieso Indemnification


of the review of the assets performed by an issuer or sponsor

o Disclose which entity determines that those assets should be included in the pool despite

o Provide a tabular presentation of the pool asset characteristics

Chosen by the sponsor of the programArranger/structurer (financial institution)

Design the structure of the program

Design the structure of the risk profile of the receivables in order to create tranches and their sequential payments schedules

Design a credit arbitrage strategy

Arranges credit enhancement

Design a liquid strategy Design a profit extraction

method List and make

arrangement of counterparties to take on risks

Ensures that the transaction proceeds through each step is closed

Make agreement with first buyers of the securities

prospectus Disclose the arranger name and its form of organization

Describe the character of the arranger business

Describe the arranger material roles and responsibilities in its securitization

Disclose the arranger relevant facts its participation in structuring the transactions

Disclose the arranger other information including the size, type and growth

Disclose the arranger’s experience and the period of time that the arranger has been engaged in the securitization

Subscription agreement Agreement between the

corporation and investment bankers

Agreement among bankers

Agreements between investment bankers and underwriters, dealers or QIB

Offering memorandum, prospectus (offering circular)

Purchase agreement between the company and the initial purchasers

Legal opinions and Comfort letters

Provisions related to the initial purchase price for the securities on the issue date, subject to conditions relating to

o The SPV’s legal statuso Listing and rating of

the securities Provision requiring a

cancellation of a sale to investors if a material adverse event occurs between signing the subscription agreement and closing the securities issue


Underwriter Managers (financial institution)

Exercise agreement as first buyer of the securities

If it is a PPM, select qualified investors

Market the securities to the investors, brokers and qualified buyers

prospectus Indicate the underwriter name and address and telephone number of its registered office

Describe the character of its business

List all the types of underwriters involved in this securitization and their duties

Describe the permissible activities and restrictions on the activities

Disclose the total amount of fees to be paid

Provide information about originator’s underwriting criteria for the asset types

Disclose the anticipated schedule for the offering and description of market events

Describe the procedures by which the underwriter will conduct the offering and the procedures for transactions in connection with the offering with an underwriter and participating dealer

Agreement between the sponsor and underwriters

Agreement between the underwriters and dealers

Provide information about originator’s u8nderwriting criteria for the asset types

Disclose the anticipated schedule for the offering and description of material events

Describe the procedures by which the underwriting will conduct the offering and the procedures for transaction in connection with the offering with an underwriting or participating dealers

Agreement among underwriters (AAU)

Underwriters questionnaire and responses

Number and type of securities each manager has agreed to buy

Payment and allocation of the managers’ commission

Delegates power to the arranger/lead manager to act on behalf of the syndicate

Auditors (Accounting firms, mostly big 4, kpmg, PWC, Ernst & Young and Deloitte)

Provide confirmation of financial information in relation to the SPV, and any guarantors, and the receivables themselves

Involved in the latest audit report and financial statements of the vehicle

Provide the name of the auditing firm

Describe its material role and responsibilities in the securitization

Provide the general character of its business and its actions

Auditing agreement Discussion with the

independent auditor report

Report from management

Comfort letters

Addressed to underwriter managers

o 1st at the time of signing of subscription agreement

o 2nd just before completion


For newly incorporated SPV, report on its position immediately following the securitization

Provide the due diligence results (change or not)

Carry-out the financial modeling of the cash flows

Conduct and disclose the results of financial analysis of the collateral

File the required report to be included in the offering and disclosure documents

Disclose the auditor report Disclose if auditor opinion

is unqualified, qualified, adverse or disclaimer

Provide fees, direct and indirect and all the engagement to be paid (fee and expenses table)

It must be dated, signed and state of certification of the lead auditor or firm

SAS 59 requires auditor to evaluate going concern for a reasonable time with explanation paragraph if needed to enhance managers’ knowledge

o Discuss the degree of independence of the auditor and auditor’s consent during this assessment

o State reasons for the offering

o Confirms the reliability of the unaudited financial information

The report musto Be datedo Be manually signedo Indicate the city and

stateo Identify the financial

statement and reports that they did cover

o Must follow PCAOB standards

Depositor (originator itself or any financial institution)

A SPV acts as a depositor and registrant.

Conveys, assigns, receives, purchases and transfers or sells the pool of assets (real, personal and mixed, wherever located and however acquired) or receivables to the issuing SPV

1106 If it is different from the sponsor,

o Provide its ownership structure

o Provide general character of its activities

o Discuss its continuing duties

Purchase and assumption agreement

Purchase price Manner of conveyance Warranty provisions Recourse provisions Payment date Servicing provisions Reversal clause Agreement with respect to

safe deposit Governing law


after issuance Succession provisionSecurities finance lawyers (law firms specialized in financial transactions and securities law)

Ensure a legal efficacy of the structure

Advise on the legal and regulatory aspects of the structure

Advise on the tax aspects of the structure

Draft and negotiate the legal documents and cases

Establish the relevant legal entities

Review the corporate capacity and authority (including delegation of authority) of each party

prospectus Provide name of the law firm and its expertise and experience related to this type of securitization

Describe the form material contractual duties in the securitization

Provide the nature, terms and limitations of its contractual agreement

Retention agreement Legal opinion Comfort letters All contractual

agreements

should include opinions ono each party’s capacity

and authority (including delegation of authority) to enter into a transaction

o whether the transaction documents have been duty executed and represent legal binding and enforceable obligations

o whether the requisite consents and authorities have been obtained and registrations made timely

o whether all legal formalities for the transfer of receivables have been complied with

o whether security interest are effective

o whether choice of law and state of organization provision are effective

o tax treatment for each jurisdiction

Issuer- Special Purpose Vehicle (established by the

This is a pre-existing or newly created SPE (mostly a trust but also a LLC, LLP

1107, 10-K Describe this entity and its form of organization

Describe its permissible

almost all agreements Offering circular: terms and conditions of the

securities


originator and the structurer)

or corporation) for the purpose of the securitization. It is the nucleus of the securitization. It issues securities in PPM or public offering market.

It buys or receives them as a loan

In case of sale, the originator will remove them from its legal control and portfolio

It also issues debt securities to the investors to fund the acquisition of beneficial interest rights

activities and discretionary activities with regard to the administration of the assets

Describe any assets owned or to be owned by the issuing entity

Describe its board of directors or the like, if applicable

Describe the capitalization of issuing entity and the amount of any equity contributing to the entity

Describe sale and transfer of the pool assets to the issuing entity

Describe any arrangement, provisions, expenses and bankruptcy provisions

information about SPV information on the

underlying assets on which the securitization is based

must comply with legal requirements applicable to securities offerings in each jurisdiction where securities are listed and the jurisdiction where the SPV is incorporated or organized

Chosen by the SPV leadershipSecurity Trustee (professional corporate trustee)

He is the guardian of the trust certificates issued to new owners of securities

Holds certificates accounts before distribution date

Makes payment to investors

Holds note and securities documents

Holds and draws on reserve fund

Advances on behalf of Master servicer, if necessary

Maintains certificate register

Oversees Master

1109 Some disclosure related to Trustee may apply to them

trust deed Provisions about the security interest over the

assets making up the security package

Security trustees enforcement powers and rights to deal with the assets comprising the security package


servicer’s performance Represents interest of all

certificate holders Holds and reinvests

reserve fund amounts, payout excess to the originator or investors (it depends on contractual agreement)

Calculates payments of certificate holders

Trustee (appointed corporate trustee)

is appointed to look after the interests of the investors.

can hold assets granted to investors and benefit (including beneficial interests) of covenant and rights in the securitization on behalf of the investors.

has fiduciary duty obligation toward the investors to safeguard the assets pledged as collateral. Leaded by a Master, trustees can confer real and discretionary rights to the investors beneficiaries of the trust.

1109 Disclose the trustee name, its duties, responsibilities and its form of organization

Describe the trustee prior experience

Disclose any actions that would be required by the trustee upon an event of default, potential event of default as well as required percentage of a class or classes of ABS that is needed to require the trustee to take action

Describe any limitations on the trustee’s liability under the transaction agreements regarding the ABS transaction

Disclose any contractual provision or understanding regarding the trustee’s removal, replacement or resignation as well as how the expenses associated with changing from one

security trust deed Trust Certificate

SPV’s covenants to pay which runs parallel with the SPV’s promise to pay in the certificates representing the securities

SPV’s further covenants, representations and warranties for the benefits of the investors

Schedule of terms and conditions set out in the offering circular and the form of certificates representing the securities


trustee to another trustee will be paid

Chosen by the structurer/arranger or trustee of the SPV on behalf of the SPVPaying agent (major bank)

Set out agent powers, duties

Set out documents policies concerning payments to investors

prospectus Provide the name of the paying agent and its form of organization

Describe the paying agent material roles and responsibilities in the securitization

Provide the general character of its contractual agreement

Provide its experience in the securitization and indicate a statement or report included attributed to such experience including prior actions

Provide fees and expenses tables indicate to each item and its purpose

Paying agency agreement

Sets out techniques for payments to investors of principal and interests

Mechanism to exchange or replace damaged or lost certificates

Servicer (also acts something as receiving and paying agent, originator itself or )

Collecting principal, interest and escrow from the borrowers

o Late payment feeso Legal document

prepaid feeo Floato Other due to the

issuer (servicer) Paying taxes and

insurance from escrowed funds

Monitoring delinquencies Workouts/restructurings Executing foreclosures Remitting fees to

1108 Provide servicing experience of the company

o Generalo Relating to assets

of the type being securitized

Discuss material changes in servicing policies during past 3 years

Discuss information about financial condition, if material

Provide material terms of servicing agreement

o Advancingo Procedures of

Servicing agreement Clean up agreement (if it

also plays an originator duties)

Main duty to collect amounts due under the receivables contracts

Procedures and actions to be taken against troubled debtors

Provisions about troubled debtor management (including default notice, collection timeline and notices, repossession and liquidation)


guarantors, trustees and others providing services

In some case including revolving strategy, investing funds temporarily prior to their distribution

Accounting for and remitting principal and interest payments to the holders of beneficial interests in the financial assets

handling delinquent and defaulted assets

o Ability to waive or modify fees

o Ability to document custody

Provide limitations on servicer’s liability

Discuss back-up servicing arrangements

Investment manager (collateral manager and 3rd party investment management firm)

The portfolio of receivables underlying the securitization requires active management

o Determine the assets making up the portfolio both initially and on an ongoing basis

o Negotiate and enter agreements for the acquisition, management and sale of receivables

o Deal with valuations of the portfolio required by the SPV

o Comply with reporting requirements relating to the asset portfolio

Paid on a percentage basis

Prospectus, FWP

Provide the name of the investment manager and its form of organization

Describe the investment manager material roles and responsibilities in the securitization

Disclose there any restriction on the manager duties

Disclose general character of its business activities

Provide the nature and terms of its contractual agreement

Provide total amounts fees, direct and indirect to be paid

Investment management agreement

Vendor trading partner agreement

Strict eligibility guidelines in respect of the assets that may form part of the portfolio which the investment manager must comply with

events triggered the replacement of the manager

compliance with strict investment management reporting rules


plus other discretional incentive

Can be required to hold a junior tranche in order to share risk and raise confidence and value of the securitization

Collateral administrator (independent 3rd party, a bank)

agent hired to administer the portfolio

Maintains a database detailing the content of the portfolio and uses to

o Run performance tests

o Provide reports on the underlying assets

o Obtain valuations of the underlying assets

o Calculate payment and receipt requirements

o Open and administer bank accounts

o Direct payments to be made according to the transaction documents

Prospectus, Form S-3, FWP

Disclose the name of the collateral administrator and its form

Describe the collateral administrator material contractual agreement

Disclose terms of any administration agreement regarding issuing entity

Provide its experience in the securitization

Collateral Administration agreement

Power and duties of the collateral administrator and the collateral manager provisions

Their compensations clauses Terms of their duties

provisions Termination, resignation and

appointment of successor provision

Representation and warranties provision

Governing law clause (‘this agreement shall be constructed in accordance with and this agreement and any matters arising out of or relating in any way whatsoever to this agreement, in contract, tort or otherwise, shall be governed by the laws of the State of…’)

Bankruptcy non petition, limited recourse clause

Assignment of issuer’s rights provisions

Jurisdiction clause signatures

Swap counterparty (Wall Street firm

It can serve as either a broker or a dealer

1115 Disclose the name of the of the swap counterparty or

Swap agreement documents

Provision about detailed risks and events leading to a swap


specialized in derivatives)

As a broker, this bank matches counterparties but does not assume any of the risks of the swap transactions

As a dealer, the swap bank accepts either side of the currency and then later reduces their risks or matches it with counterparty

It can line up behind on the sequential payment schedules agreement with the investors as a residual class owner

A swap is a derivative when two counterparties agree to a contractual agreement to exchange cash flows at periodic intervals

calculation agent Disclose the name of the

derivative counterparty Disclose whether the

significance percentage is less than 10%, at least 10% but less than 20% or 20% or more

Describe a material provisions regarding substitution of the derivative counterparty

Disclose its determination of any Amount of derivatives

Disclose, insert and file the swap agreement as exhibit

Disclose total fees, direct or indirect to be paid

File the agreement relating to the derivative instrument as an exhibit

o Generalo Early terminationo Taxationo Rating

downgrade or withdrawal

o Credit support agreement

o Interest deferralo Transfers

Provision about credit defaults, swap arrangement, swap counterparty and premium payment

Provisions about risk sharing arrangements include price adjustment clause, neutral zone, outside neutral and zero cost insurance clauses.

Monoline Insurer (Monoline insurance company and large insurance specialized as provider of financial obligation, credit enhancers)

An insurance policy with a monoline and irrevocable agreement to pay interest and principal at the originally agreed schedule payments

Monoline insurers aim to minimize the risk by

o Accepting only selected investment grade program

o Using a deterring tough analysis and due diligence process

1114 Disclose the name of such enhancement provider and the nature of business of the monoline insurer

Disclose any actions that would be required by the monoline insurer upon an event of default and potential event of default

Disclose any limitation of this contractual agreement

Disclose any contractual provision or understanding regarding its termination, resignation or replacement

Describe the method used

Insurance policy agreement

Common policy declaration Policy number, effective

date, expiration date Name of the insurance

company and broker Premium for each coverageCommon policy condition Cancellation terms Changes examination of books and

records inspections and survey transfer rightscoverage parts


o Maintain a diversified portfolio

In evaluating the overall credit worthiness of the monoline, an analysis must evaluate the adverse change in cash flow waterfall and the sufficiency of the monoline cash reserves and capital, rating activity, whether the monoline is in default, in that red zone or default appears imminent and the potential for intervention by an insurance or other entities

for calculation, covering a least 5 fiscal years

o Aggregate principal amount of all guarantee

o Reserve ratioo Recovery rateo Loss rateo Claim rate

Clearing houses (Depositary Trust & clearing corporation or Fedwire)

Provide clearing and settlement services for the securities

prospectus Disclose the name and the nature of the business of the clearinghouse

Identify each clearing house used and any minimum amount that must be assigned as a condition of the transaction

Discuss any arrangement to keep this amount outstanding

Disclose any rights related to any excess cash

Disclose any requirement in the transaction agreements to maintain a minimum amount of excess cash flow or spread

Insurance clearinghouse service (ICS) agreement

Vendor trading partner agreement

Fedwire testing instructiono Institution nameo ABA numbero Test contact nameo Type of testo Test start date

Fedwire Fund and Fedwire securities service form (3rd party service arrangement, operating circular)


from or retained interest in, the transaction and any actions that would be required or changes to the transaction structure that would occur if such requirements were not met

Rating agencies (Standard and Poors, Moody’s investor services, Fitch ratings service or Duff& Phelps Credit rating Co)

Rates the securities to opinion whether the SPV has a strong or weak capacity to pay interest and principal when due

The rating is provided after detailed statistical analysis on the probability of default and the effects of such default on the ability of the SPV to comply with its payment obligations in respect of the securities

1120 Disclose whether the issuance or sale of any class of offered securities is conditioned on the assignment of a credit rating agencies would be useful information to investors

Identify each rating agency that is used and the minimum rating that must be assigned as a condition of the transaction

Discuss any arrangement to have that rating monitored while the ABS are outstanding

Include a statement explaining that the rating is not a recommendation to buy, sell or hold securities

Disclose if the arranger and sponsor has obtained a preliminary rating to that class of ABS

Partnership or trust Deed or certificate of incorporation

Copy of the Board resolution authorizing the rating

Copy of the Bylaws Copy of the project to be

rated Copy of all financial

statements for the last 3 fiscal years

Additional documents under request from the rating firm

CIK number Usually, if the issuer does not

request the rating, Moody and S & P will simply do the rating on the basis of the publicly available information and disclose it to the public

Fitch and Duff Phelps have only done solicited rating of any type of securities

Feeso Onetime fee to

request rating anytime

o S&P ($25,000 to $125,000)

o Moody’s (~$ 130,000)

Listing agent (law form or company specialized in listing in exchange)

Research and list the company or its shares on the national securities exchange

Set out the details of the

prospectus Provide the name and the nature of the business of the listing agent

Disclose to what extent the listing agent rely on the

Draft Form 8-A Listing application for debenture

Statement of understanding

In lieu of Form 8-A, other forms can be used including Form 10

o 8 copies, one is manually signed


listing strategies company’s audited financial reports

Disclose if the listing agent did request related shareholders data

Disclose of the listing agent did find the securitizer’s resources sufficient to meet its obligations

Disclose whether the listing agent did find any conflict of interest arising from the securitizing transactions

Disclose whether the listing agent did verify any accuracy of the transactions

Disclose any limitations arising from the listing agent’s contractual duties

Policies and procedures, instruction

Listing application for American Depositary Receipt

Rule 315 letter

Stock exchange (NYSE, NASDAQ, Japan Exchange group, Euronext, London Stock exchange group, Hong Kong stock Exchange, TMX (Canada), Deutshe Bourse)

Serves as a global platform to trade securities with electronic , anonymous and hybrid trades

Maintain a body of rules to regulate its members

prospectus Provide the name and the nature of the national securities exchange

Disclose if you will not list the securities

Disclose where the trading will be developed

Copy of Charter Copy of By laws or

Partnership, operating agreement or Trust deed

Description of registrant’s securities to be registered

Certified check payment of the registration fee

Copies of the latest definition of proxy, annual report to the shareholders, annual report filed to SEC and quarter reports filed to SEC

Copy of Board resolution

After the program: the company must file 2 copies of final listing application


authorizing the securitization (certificate of secretary as to adoption of resolutions)

Copy of shareholders resolution authorizing the issuance of securities for listing

Copy of specimen certificate (if needed)

Copy of good standing certificate from jurisdiction of the entity

Letter to NYSE from the company General counsel

Copy of this letter for filing stamp (along addressed stamped envelope)

Liquidity facility provider

Sets out the details of the liquidity support facility

This is a lender under short term basis in relation to certain tranches of the issued securities

prospectus Disclose the name of the liquidity facility provider, its business and its material roles in the securitization

Provide the nature and terms of its contractual agreement

Disclose any limitations on the liquidity facility provider under the provider agreement regarding the ABS transaction

Provide a summary financial information of the liquidity provider

Disclose if there is any

Liquidity agreement Detailed of the standard loan agreement terms and conditions including the amount of the loan facility and the events leading to their uses

For tax reason, the jurisdiction does matter


custodian intermediate transferor and liquidity providers in the secondary markets

Disclose any material terms of any agreement with that party regarding the ABS transaction

Credit enhancement provider

Use as a financial technique to improve the creditworthiness of the issued securities

Guarantees payment of all contractual cash flow waterfall with investors for intervention when the default appears imminent

prospectus Describe external and internal enhancement

For external enhancement providers

o Describe the provider and its business

o Summary financial information for 10% provider

o Audited financial statement for 20% providers

Credit enhancement agreement

Subordination clause Reserve accounts clause Demand notes clause Letters of credit clause Surety bond clause Guaranteed investment

contract clause Swaps or other interest rate

protection agreement Repurchase obligations


Download - Assessing ABS players table

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