Cashflows meaning

Rationale Securitisation is the transfer of sizeable portfolios of income‑generating assets to a special purpose vehicle (SPV). The SPV finances the purchase price by issuing interest‑bearing securities—commonly termed ‘bonds’ or ‘notes’—into the capital markets. These securities benefit from security over the assets and/or the cashflows they produce (the ‘receivables’). Cashflows from the receivables are applied to pay interest and to repay principal on the securities. Types of receivables that can be securitised include: mortgage payments bank loan repayments lease/rental payments credit card repayments insurance premium payments Benefits of securitisation include: cheaper borrowing—the SPV may achieve a higher credit rating than the debtor company (originator). Either the obligors for the receivables carry a stronger rating than the originator, or credit rating agencies may find it simpler to rate a single asset (the receivables) rather than the originator, which presents more variables...

What does this Practice Note cover? This Practice Note explains the principal features of asset-backed commercial paper (ABCP), conduits and structured investment vehicles (SIVs). It also summarises the key legal and regulatory issues that shape their construction and application. What is asset-backed commercial paper? Commercial paper (CP) is a short-term debt instrument commonly issued by corporates or financial institutions to address near-term funding needs. It is typically unsecured and offered by issuers with strong credit ratings. For more detail on commercial paper, see Practice Note: Commercial paper and euro-commercial paper. ABCP is a type of CP that is secured against pools of assets, most often receivables delivering predictable cashflows. The issuer of ABCP does not itself require a high credit rating; investors assess the calibre and expected cash flow of the underlying collateral rather than the issuer’s credit profile. A wide range of assets may back ABCP, such as: credit card receivables residential and commercial mortgages commercial loans (eg auto loans...

This Practice Note offers a concise primer on repackagings. For links to resources with deeper guidance on particular aspects of repackaging transactions, see: Further information. What are repackagings? Repackagings constitute a form of asset-backed security (ABS), i.e. a limited recourse debt instrument issued by a bankruptcy-remote special purpose vehicle (SPV) and secured against a financial asset or a pool of financial assets. The objective of a repackaging is to deliver a bespoke ABS investment with a blend of credit, currency, interest rate and/or payment date features that are otherwise unavailable to the investor. Typically, a repackaging ABS issue is held to maturity by a single investor and may have been prompted by a reverse enquiry from that investor. What is an asset swap repackaging? Asset swap The most straightforward and most common variety of repackaging is an asset swap repackaging (or asset swap repack). An asset swap is a routine market transaction where an investor purchases interest-bearing bonds and then enters into a swap agreement...