Presentation Transcript

1. DACT

   Securitisation: An efficient alternative funding tool

   Maurice Jongmans Rabobank International Corporate Origination and Structuring
2. Definition Illiquid pools of assets which are packaged, ring-fenced, underwritten and distributed in the form of liquid Asset Backed Securities. The cash flows of the underlying assets are the prime source for the payment of interest and principal of the Asset Backed Securities.
3. …Bold statement? “After the 2008 Credit Crisis, Securitisation has no raison d'être”
4. Issuance Trends – Term Securitisation Securitisation still holding strong although at a somewhat lower level Issue size per year in EUR billion YTD 2011 by Asset Class YTD 2011 by Country Source: DB, Bloomberg
5. …then perhaps? “Securitisation is less efficient”
6. Pricing of term securitisation first half 2007 versus 2011 Credit Margin of an AAA-bond; being the most senior position of the transaction Nov. 2011 2007 Residential Mortgages Backed Securities 120 bps 11 bps Commercial Mortgage Backed Securities 400 bps 18 bps Auto Loans 65 bps 45 bps Collateralised Loan Obligations 350 bps 25 bps
7. For corporate securitisation, let’s turn to ABCP-market The so-called Asset-Backed Commercial Paper (ABCP) Market in short: Commercial Paper with a tenor less than 360 days Frequent issuance by bank sponsored ABCP conduit Size: Currently around USD 380 billion Short-term ratings A-1 / P-1 (consistent with a long term A / A2 rating) Backed by assets and cash flows Matches short-term, variable and/or smaller portfolio’s of receivables
8. ABCP Conduit Securitisation: an overview Usually starts with EUR 40 million Transaction Size Assets suitable: trade receivables, lease portfolios, auto loans, consumer loans and film rights Asset Type Transaction structured to short term A-1 / P-1 ratings Rating Typically 85% - 90% of eligible receivables Advance Rate New subsidiaries, new jurisdictions can be added post closing Accommodates multiple currencies Allows for fluctuating pool sizes and seasonality Flexibility Key Considerations 2-3 months to closing and funding from mandate and complete data set Time Frame
9. ABCP – market: very liquid market for client driven deals Total Outstanding in USD billions from January 2001-October 2011 Source: FED, Rabobank
10. ABCP – market: and efficient! As example Rabobank’s own client conduit Nieuw Amsterdam Cost of Funds (1 year) vs. 1, 3 months US LIBOR Cost of Funds (1 year) vs. 1, 3 months EURIBOR Average 1 year US LIBOR and CP rate Average 1 year EURIBOR and CP rate
11. ABCP-securitisation structure Typical Conduit Securitisation Structure Basic Concept From the Corporates perspective Legal: TrueSale Risk Transfer: Non Recourse Accounting: On Balance Sheet (Standard) Account Debtors Trustee LiquidityFacility Receivables Sales Sale of Receivables CP Proceeds Corporate SPV (Purchaser) Nieuw Amsterdam ABCP Investors Ownership Interest Proceeds Limited Recourse Loan Facility CP Notes rates A-1/P-1
12. ABCP-securitisation: Basic Concept Usually a revolving sale of assets to an SPV per month, bi-weekly, weekly or daily Ideally, portfolios are highly diversified but larger concentrations can usually be accommodated Risks of the portfolio are substantially transferred, although the Borrower holds a first loss position in the portfolio Investors look to the assets for repayment, not to the Borrower, and are protected from the applicable credit enhancement No change to the Borrower’s credit and collection policies or cash management procedures Corporate remains servicing portfolio Going concern no notification to debtors of the sale of receivables
13. ABCP-securitisation structure: Funding Side Liquidity Facility: Sponsored by banks To support liquidity of the ABCP paper Liquidity Facility Account Debtors Trustee Receivables Sales Sale of Receivables ABCP Investors Nieuw Amsterdam Proceeds Corporate SPV (Purchaser) CP Notes rates A-1/P-1 Proceeds ABCP Investors Institutional Investors Name of corporate unknown to investors
14. ABCP-securitisation structure: Corporate Side Securitisation structure Account Debtors Trustee Liquidity Facility Sale of Receivables Corporate SPV (Purchaser) Nieuw Amsterdam ABCP Investors CP Proceeds Proceeds CP Notes rates A-1/P-1 Relation between Corporate and SPV Receives purchase price (on average 85-90% of the total receivables portfolio) Purchase price is determined based upon historic performance; defaults, write offs, dilution, DSO After collection of 100% of outstanding receivables, the remaining 10 - 15% after interest deduction and cost will flow back to the company
15. Factoring vs. Securitisation FACTORING SECURITISATION Program Limit Differs, usually a max. of EUR 150 mln From EUR 40 mln, transactions in excess of EUR 1 bn not uncommon Commitment If debtors are offered 1-year commitment, but 2-or 3 year facilities possible Debtors Cherry picking – in most cases ‘household names’ The portfolio approach Funding Bank Funding Funding in Capital Market Static Dynamic Advance Rate One country per facility One or more countries Number of Countries Credit insurance usually is required Normally no credit insurance needed Insurance
16. ABCP-securitisation: Benefits & Disadvantages Advantages Non-rated companies can tap the international capital markets New, incremental source of liquidity – diversification of funding Term commitments are possible Syndication can address wallet sizing concerns of other relationship banks Potential off balance sheet solutions can be explored Specific financial covenants typically not required but cross default to existing loan covenants Disadvantages Securitisation is not a product for all for example: a smaller portfolio diversified over multiple countries can be costly Advance rate depends on quality and availability of historical receivables performance data Although it does fit well with other financing in many cases a carve out language may be necessary Available assets for bi-lateral bank facilities reduces Funding is also dependent on efficiency and liquidity of conduits lenders