Asset-backed security (ABS) meaning

This Practice Note outlines collateralised debt obligations (CDOs) and the relevant UK regulatory regime. It addresses: fundamentals such as special purpose vehicles (SPVs), securitisation, tranches, and creating security over a portfolio of financial assets, which may include asset-backed securities (ABS), mortgage-backed securities (MBS) and other issues of CDO securities the key participants in a CDO transaction (arranger, portfolio manager, rating agencies, issuer and investors) the principal CDO structures (cash flow CDO, market value CDO and synthetic CDO) the main portfolio management approaches (dynamic and static) the capital structure of SPVs used for CDO transactions the role of hedging in CDO structures key considerations and legal issues for CDOs (bankruptcy remoteness, methods of transferring the underlying assets to the SPV, jurisdiction and tax issues, credit enhancement and overcollateralisation) What is a CDO? Core concepts Collateralised debt obligations (CDOs) are intricate, high-value arrangements involving many parties, extensive documentation and, commonly, multiple jurisdictions. A CDO transaction involves an orphan shell...

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...

This glossary sets out numerous expressions regularly encountered in the restructuring & insolvency sphere. Words shown in bold within definitions are themselves explained in other entries in this glossary as well. A Article X The MLIJ contains a single provision named Article X, aimed at jurisdictions that have already implemented the MLCBI, like England, or are weighing its adoption. Article X states: ‘Not withstanding any prior interpretation to the contrary, the relief available under [insert a cross-reference to the legislation of this State enacting Article 21 of the UNCITRAL Model Law on Cross-Border Insolvency] includes recognition and enforcement of a judgment’ (see Practice Note: UNCITRAL model law on recognition and enforcement of insolvency-related judgments (MLIJ): Article X). Asset-backed security (ABS) A form of security anchored by asset pools, for example loans, leases, and credit card receivables. Assimilated law From 1 January 2024, ‘retained law’ has been retitled ‘assimilated law’. The body of domestic law originally arising from EU obligations, created by the European...