Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Process
The process of Securitization involves the following steps:
Transfer of assets by the originator (person holding the assets) to an entity (company or a trust) specially created for the purpose called Special Purpose Vehicle (SPV). Special Purpose Vehicle is a separate entity formed exclusively for charting this deal and providing funds to the originator. The SPV may be formed as a company under the Companies Act or a trust under the Indian Trusts Act.
The assets transferred should preferably be homogenous in nature in terms of the risk attached to them and/or maturity such that the pooling of such assets would be convenient. SPV divides this pool of assets transferred by the originator into marketable securities called Pay or Pass-Through Certificates and resells them to various investors.
Investors may either be banks, mutual funds or state or the central government. The investor may even be the parent company or the financier of the originator.
The issue of securities is managed by a merchant banker, who may underwrite the whole issue, or a syndicate of merchant bankers. The originator continues to administer the loan portfolio for some fee and he passes the collections to the trust which services the securities.
Apart from the SPV, a trustee is normally appointed to oversee the process of securitization. An escrow account is created for the purpose of distributing the receivables to the investors in the deal. The trustee maintains such an escrow account.
Figure
In India, mutual funds are allowed to invest not more than 5% of their total corpus in the securitized instruments. Also, unlike in the West, insurance companies are not allowed to invest in securitization deals. This, however, is expected to be relaxed with the entry of private insurance players.
Theoretically, any resource with predictable cash flows can be securitized:
Future rentals of a fishing boat.
Remuneration that is paid to a movie star.
Bills that are made to a five-star hotel.
Tickets that are to be sold at a cinema hall.
Future billings for an airline.
Dues that have to be paid by the state electricity boards to the power generating companies.
Credit card receivables.
Loans that are to be paid to the housing finance company.
Mortgages in lieu of future payment.
Hire purchase receivables.
Non-performing assets of a financial entity.
CLASSIFICATION OF BUDGETS Budgets can be categorized on the basis of several bases. There are three important bases for classifying budgets. They are - functions, time, and
(a) A debt of $3600 with interest at 6% compounded semiannually is to be amortized by semiannual payments of $900 each, the rst due in 6 months, together with a nal partial payme
the following information related to sun ltd.paid-up capital-1000000. earnings of the co-100000. dividend paid-80000. price-earning ratio(pie)-20. no of equity shares-100000.find o
What is Planning Internal auditors must plan the audit work so as to perform the audit in an effective manner.There must be sufficient audit programmes in existence which set o
Which of these two methods is better: discounting the Equity Cash Flow or discounting the Free Cash Flow? The results we get by discounting the Equity Cash Flow and the Free Ca
Compare diversifiable and nondiversifiable risk. Which do you think is more important to financial managers in business firms? Diversifiable risk is able to be dealt with by of
If the issuer company is taken over, then the bondholders are likely to suffer. It is due to lowering of the stock prices in the market as a post takeover effect.
We defined the conversion premium as the difference between the market price of the convertible and the conversion value. The conversion premium ratio tells us ab
I have a assignment of financial accounting Its a report on company Assignment length 2000 words
What are some of the primary advantages when a corporation has operations in countries other than its home country? What are some of the risks? Foreign operations may decrease a
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd