structured finance

[...]...1 Characteristics and Common Features of Structured Finance Operations 3 1.3 The advantages of assembling a financing transaction in structured form The advantages to be had through off-balance sheet forms of financing can be ascertained by analyzing the differences between on-balance financing... economic benefit of structured transactions lies in the cost of funding of new financial resources for the initiative If the benefits of a reduced cost of funding are greater than the cost of credit enhancement (of whatever kind: a purchasing contract or a tranche-based bond issue, a pledge to pay penalties signed by a counterpart of the SPV, insurance coverage), realizing the initiative on a structured basis... 225,139.94 578 26 104,233.51 357 15.2 Bank 202,301.21 447 23.3 214,954.51 451 31.3 Commercial mort lender 89,799.27 167 10.4 86,956.27 172 12.7 Finance co (diversified) 76,918.00 176 8.9 55,991.29 151 8.1 Investment firm 75,857.26 264 8.7 59,890.69 204 8.7 Finance co (captive) 67,080.72 72 7.7 54,864.77 65 8 Securities firm 29,208.59 110 3.4 10,946.48 52 1.6 Credit-card bank 26,949.90 52 3.1 18,623.73... market Issuances share % Mortgage bank 89,483.61 178 33.3 57,879.44 125 31.6 Bank 59,586.22 98 22.2 40,064.63 96 21.9 9.5 Finance co (diversified) 25,219.71 45 9.4 17,409.91 40 Commercial mort lender 20,044.30 36 7.5 13,868.83 34 7.6 Investment firm 18,967.91 45 7.1 14,496.12 47 7.9 Finance co (captive) 18,428.97 14 6.9 19,852.80 21 10.8 Credit-card bank 10,278.15 14 3.8 4,098.02 7 2.2 Sallie Mae 6,896.79... market has rapidly expanded thanks to the introduction of a specific regulation (Law 130/99) Two main types of securitization transactions exist: 1 Cash flow based (CFB) securitization The transaction is structured as a sale of assets by a company (Originator) to a special entity (Special Purpose Vehicle, SPV), which then issues securities backed by the underlying assets The CFB securitization is also... international data on securitization market are from: www.abalert.com by Harrison Scott Publications, while the data on Italian securitization market are from www.securitisation.it by Talete Creative Finance The two databases coincide with reference to the Italian market analysis 7 The example represented in Figure 2.1 considers a transfer of credits and receivables between the Originator and the SPV... defined as “Special Purpose Vehicle” (SPV) or “Special Purpose Company” (SPC) It may take the organizational form of corporation or limited partnership − Issuance of Asset Backed Securities In order to finance the asset purchase, the SPV issues securities (usually debt obligation instruments), which are backed by the acquired assets (Asset Backed Securities – ABS) The cash flows originated by the acquired... the pool of assets by the Originator to an external entity (SPV), which has no business other than acquiring assets and issuing securities backed by these assets − Issuance of asset backed securities To finance the acquisition of the assets, the SPV issues securities to be sold in the marketplace to investors These debt securities are secured by the underlying assets acquired by the vehicle (Asset Backed... loan originator is a financial institution, such as a bank It wants to raise money by liquidating a pool of mortgage loans A SPV is established for this purpose and a securitization transaction is then structured following several steps A pool of assets is selected by the Originator (bank) The bank decides to sell a group of commercial and residential loans A true sale transaction follows The bank sells... context, guaranteeing also an underwriting service This connection between market makers and financial institutions is crucial to ensure a future growth of the secondary market The Ministry of Economics and Finance Department seems willing to contribute to the development of the secondary market In fact, with relative to the securitization of INPDAP credits, the Government required that the Arranger would . realizing a transaction following structured finance logic. 1.2 Typical features of structured finance transactions Using the logic behind arranging financing on a structured basis, a transaction. positions), structured finance transactions share many basic principles with medium to long term lending. In fact, in the past national banks have been participants in project finance, acquisition finance, . Features of Structured Finance Operations Stefano Caselli and Stefano Gatti 1.1 Introduction This chapter gives a brief introduction to the characteristics that various structured finance transactions