Like many other areas of finance, “Structured Finance” has suffered a backlash from the financial crisis that has ravaged global financial markets. However, there is strong political and private market interest in bringing back to life important financing sources such as “asset securitization” and “leveraged finance”, and we have already seen the first signs of recovery. Structured Finance” will undoubtedly survive the crisis – possibly in a simpler form.
The purpose of this seminar is to give you a thorough introduction to “structured finance” and a good understanding of how these financing techniques can be used to finance acquisitions and asset portfolios and for risk transfer.
We start with a brief introduction to “structured finance” and we give an overview of the different types of “structured finance” transactions and their uses. We also give an overview of historical developments – and of the role of “structured finance” transactions in the financial crisis.
We then explain in-depth how “asset securitization” can be used as a financing and risk management tool. We give an overview of different types of “securitization” transactions and we take a closer look at the various elements in the structuring of a securitization transaction. We explain the role of the “Special Purpose Vehicle” (SPV) and discuss the legal aspects in setting up such an SPV. Further we explain techniques for credit enhancement and for payment management.
We present and explain a number of specific structures: Securities backed by home equity loans and (the now infamous) “subprime” mortgages, commercial receivables, auto loans, credit card loans. We also present examples of “future flow” and of “intellectual property” securitizations. In each case, we explain the main deal features, and we illustrate with real-life case studies. We also explain the mechanics, pricing and risks of mortgage backed securities and their derivatives.
Further, we look at “Collaterized Debt Obligations” - the securitization of bank loans, bonds and other financial assets. We explain how these structures are used to transfer risk, to obtain funding of illiquid asset portfolios, to obtain regulatory relief and to enhance the return on capital of banks with high funding levels. We give practical, real-life examples of these structures, and we explain their pricing and risk characteristics. We also discuss how this market may survive the crisis in a more simplified form.
We then explain how “leveraged finance” is used to fund acquisitions of companies or parts of companies by an existing internal management team, an external management, or a third party (acquisition). We also discuss how the financial and structural risks of leveraged financing transactions can be identified, analyzed and managed and how you can use leveraged loan CDS to gain or remove exposure to these risks.
Finally, we explain how “mezzanine” finance can used to close the gap between equity and debt financing. We give examples of typical terms of mezzanine capital and illustrate how it is used to fund growth opportunities, new product lines, new distribution channels or plant expansions.