Securitization Law and Practice: In the Face of the Credit Crunch
Securitization--once a fairly straightforward means of offering collateral for investment--has mushroomed into a massively complex area of financial practice. The central role occupied by such risk-distributing products as collateral debt obligations (CDOs), credit default swaps (CDSs), collateral loan obligations (CLOs), and credit derivatives has given rise to one of the most crucial inquiries of our era: Is the financial collapse that threatens the world financial system due merely to rogue traders? Or is there something in the derivative idea itself that spells inevitable disaster? Most important, can we isolate the truly productive aspects of securitization and learn to recognise pitfalls in advance? As always in such ideational minefields, it is the legal practitioners who are expected to provide guidance to distressed investors and asset dealers. Hence this vital new book. Written from a distinctly practical point of view by Jan Job de Vries Robb with contributions from Paul Ali and Tim Coyne--all three leading authorities with extensive experience as counsel both in-house and in private practice, in addition to sterling academic credentials--the book sheds clear light on every aspect of today's securitization techniques, including welcome guidance on the following: ; keeping track of exposure to the CDO market; and evaluating such emerging asset classes as commodity risk, microfinance, and project finance risk. In the course of the analysis the book proceeds from the relevant framework and guiding legal principles, through key risks and building blocks in securitization transactions, to the various product classes and sub-classes and their differences and common denominators. Non-credit risk and niche products (such as fund and insurance securitization) are also covered. The final chapters are devoted to the applicable rules as laid down in Basel II and International Financial Reporting Standards.
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Structure and Documentation
The Liability Side
Implementation of Basel II
an AustralianEuropean Perspective
Accounting Analysis Applying the Flow Chart
Has the Entity Transferred Substantially all the Risks and Rewards?
b Has the Entity Transferred its Rights to the Cash Flows?
Collateralized Loan Obligations CLOs and Collateralized
NonCredit Risk Securitization
Commodity Risk Securitization
Foreign Exchange Risk Securitization
Securitizing Life Insurance Policies
Whole Business Securitization
Overview of Structure
Has the Us Moved Yet?
Us Accounting Overview
A Sale Criteria
Effective Control Criteria
Qualifying Special Purpose Entities QSPEs
Assets a QSPE May Hold
Variable Interest Entity
Variable Interest Entities
Decision Tree to Determine if Sale or Secured Borrowing
Impact of Proposed Changes
bank bankruptcy Basel Basel II bonds borrower cash flow catastrophe bonds collateral manager confirmation corporate counterparty credit default swap credit derivative transaction Credit Derivatives Definitions credit derivatives market credit enhancement credit event credit rating credit risk credit-linked notes creditors criteria debt deliverable obligations equity default swap event of default excess spread exposure failure to pay fees Fitch Ratings floating charge hedge funds insolvency instance investment investors ISDA ISDA Master Agreement issued issuer liquidity loan loss note holders notional amount occurrence option originator payable payment date physical settlement principal protection buyer purchase rating agencies re-characterization receivables reference entity reference obligation reference portfolio referencing relevant requirements restructuring securitization transactions security interests security trustee seller servicer set-off Standard & Poor’s Structured Finance super senior swap swap counterparty synthetic CDO synthetic securitization synthetic transactions termination tions total return swap trading tranche transaction documents trigger typically underlying waterfall