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2017 | OriginalPaper | Buchkapitel

2. The Alchemy of Securitization. Evolution and Perspectives

verfasst von : Paolo Comuzzi, Roberto Tasca, Simona Zambelli

Erschienen in: Structured Finance

Verlag: Springer International Publishing

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Abstract

The term securitization is used to represent the process whereby assets are pooled together, with their cash flows, and converted into negotiable securities to be placed into the market (Tasca and Zambelli 2005) or to be used as collateral in refinancing transactions with Central Banks or with market participants. Securitization is aimed at transforming illiquid assets into securities. These securities are backed or secured by the original underlying assets and are generally defined as Asset Baked Securities (ABS). Theoretically, any financial assets producing cash flows (receivables, residential and commercial mortgages, credit card receivables, and other consumer and commercial loans) can be securitized (see, e.g., Buchanan 2016, Buchanan 2017; Kara et al. 2016; Malekan 2014; Lipson 2012). The main purpose of the chapter is to analyze the basic characteristics and the market structure of traditional securitization, especially with reference to the Italian market.

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For the lack of regulation, the securitization activity has also been labeled as shadow banking (see, e.g., Gennaioli et al. 2013).

For current updates about rules and regulations on securitization in Italy see, e.g., the following website: http://www.securitisation-services.com/it/normative/index.php.

An ABS represents a security backed by specific assets. This means that principal and interest repayment rely directly on the capability of the underlying assets to generate the expected cash flows. In the US it is common to distinguish between:

Asset backed securities (ABS), which represent securities backed by specific assets (auto loans, credit card receivables, student loans, equipment leases). This definition does not include mortgages loans or corporate bond loans;
Mortgage backed security (MBS), which are securities backed by specific mortgage loans.

Outside the US, the definition of ABS may include deals backed by mortgages loans. For the purpose of this chapter, we will use the term of ABS to indicate all classes of securitized instruments. See: Bhattacharya and Fabozzi (1997), Saunders and Cornett (2004), Burton et al. (2003), Spotorno (2003).

For a recent overview of the literature on securitization and its real effects see, e.g., Berg et al. (2015), Buchanan (2016, 2017), Lu et al. (2013), Albertazzi et al. (2011). See also: Battacharya and Fabozzi (1997), Fabozzi (1999), Colagrande et al. (1999), Bontempi and Scagliarini (1999), Artale et al. (2000), Damilano (2000), De Angeli and Oriani (2000), Rumi et al. (2001), Porzio et al. (2001), Galletti and Guerrieri (2002), Ferro Luzzi (2000), Gualtieri (2000), La Torre (2000), (Caneva 2001), Navone et al. (2002).

Sections 2.2, 2.3, 2.4, 2.6 represent a revised version of Tasca and Zambelli (2005).

See: Saunders and Cornett (2004), Burton et al. (2003), Spotorno (2003).

Recently, another form of securitization became important: the whole business securitization in relation to leveraged buyout acquisitions (SBO deals). For more details on SBO deals, see Buszko et al. (2013). For more details on Leveraged Buyout deals and their legal structure, see, e.g., Zambelli (2008, 2010).

For a recent overview of the literature on securitization and its real effects see, e.g., Berg et al. (2015), Buchanan (2016, 2017), Lu et al. (2013), Albertazzi et al. (2011). For a recent overview of the risks connected to securitization see, e.g., Chen et al. (2017), Le et al. (2016), Laurent et al. (2016), Cifuentes and Pagnoncelli (2014), Wu et al. (2011).

The example represented in Fig. 2.1 considers a transfer of credits and receivables between the Originator and the SPV.

The payments collection related to the securitized portfolio is managed by a third party, the Servicer, which usually is represented by the Originator itself.

For a critical overview on the real efficacy of rating agency to actually forecast the default probability of a issuer, see, e.g. Lützenkirchen et al. (2013), Peicuti (2013).

In a traditional financing, instead, the return to investors depends mainly by the capacity of the company to generate sufficient cash flows to repay its debt obligation.

This Section is based on Tasca and Zambelli (2005).

The expected return to investors depends mainly on the risk associated with the cash flows guaranteed by the securitized assets, rather than the default risk of the Originator.

JCR-VIS Credit Rating Company Limited (2003), Bond Market Association (2002).

In the US there is no bankruptcy code provision regulating the legal status of securitized assets. Securitized assets are then considered as legally sold and are excluded from the eventual bankruptcy procedure of the Originator. For more information see: Nomura Fixed Income and Research (2002).

In case of bankruptcy of the SPV, the period in which it is possible to reclaim the sold assets is six months. See: Spotorno (2003).

See, e.g., Saunders and Cornett (2004), Burton et al. (2003), Spotorno (2003), Leixner (http://pages.stern.nyu.edu), JCR-VIS Credit Rating Company Limited (2003), Nomura Fixed Income and Research (2002), Bond Market Association (2002).

Saunders and Cornett (2004), Burton et al. (2003), Spotorno (2003), Leixner (http://pages.stern.nyu.edu), JCR-VIS Credit Rating Company Limited (2003), Bond Market Association (2002).

For more information: JCR-VIS Credit Rating Company Limited (2003), Nomura Fixed Income and Research (2002).

See Caputo et al. (2001).

By law, the SPV needs be exclusively involved with one or more securitization processes.

So far, the issuances of ABS in Italy have been directed to qualified investors and consequently no information prospects have been elaborated.

In the US market, the servicer activity is usually played by auditing companies and not by financial institutions.

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Titel: The Alchemy of Securitization. Evolution and Perspectives
verfasst von: Paolo Comuzzi
Roberto Tasca
Simona Zambelli
Verlag: Springer International Publishing
Buch: Structured Finance
Print ISBN: 978-3-319-54123-5

Electronic ISBN: 978-3-319-54124-2

Copyright-Jahr: 2017
DOI: https://doi.org/10.1007/978-3-319-54124-2_2