The securitization process involves numerous parties in specialized roles for the creation and issuance of asset-backed securities.  Besides the ABS buyers – investors, for securitization of a lessor’s receivables, the following parties are required:

  • Originator – The lessor that originates and transfers to an SPV by means of a true sale of the legal title together with the risk, rewards and control of a pool of the lease receivables used as collateral for the asset-backed securities;
  • Sponsor – The party in a multiseller conduit transaction that arranges and structures the transaction, often the parent entity or an affiliated arranger of the originator;
  • Special purpose vehicle (SPV) – The bankruptcy-remote third-party securitization vehicle that is set up by the originator solely to purchase lease receivables from the originator, to hold and protect the pooled assets from the originator’s bankruptcy, and to finance the purchase of the assets by issuing and selling ABSs;
  • Servicer – A party – commonly the originator – that is responsible for the ongoing interaction with the debtors (borrowers/lessees), monitoring the pooled assets and collecting rental payments and other cash flow from the underlying assets and their remittance to the SPV, usually accumulated in a reserve with any excess paid to the originator, as well as managing the flow of information between the parties in the ABS transaction;
  • Credit enhancer – A party that improves the credit rating of an ABS above that of the underlying assets by means of a credit enhancement from the originator in the form of an internal credit enhancement, such as cash collateral or overcollateralization, and/or from a third party as an external credit enhancement, such a letter of credit, surety bond, wrapped security or cash collateral account (CCA);
  • Rating agency – The party that analyses the securitization program and rates the transaction by assessing the originator, the quality of the underlying assets, the SPV, the servicer and the credit enhancement – all ABSs must be rated; and
  • Underwriter – The financial intermediary commonly contracted by the originator to advise on the structuring of the transaction, analyze investor demand, price and market the securities to investors, and provide liquidity support in the securities’ secondary trading, whereby they often underwrite the issue by buying the offer at a discount before reselling to investors.

Related Items