Securitisation - Case Studies

Case Study of Securitisation of European Residential Mortgages (2 hours)

The module will consist of a pre-sale report issued by one of the international rating agencies. The aim of the case study will be to understand the following aspects:

• How the structure was created

• Risks and mitigants

• capital adequacy required prior to and after transaction

A questions and answer workbook looking at the key features Each group will make a detailed presentation to the second group using PowerPoint presentations during which they will explain why the deal in question has been structured in a certain way, how the originator and investors benefit in certain features. The group will make itself open to questions from both the trainer and the other group. After each case study, the trainer will give a detailed presentation on the structure in question. The structures have been especially chosen for their relevancy with respect to the asset class, the synthetic securitisation and the European context.

Click here to view PDF of PowerPoint file from module

Case Study Leonardo Plc – Synthetic Securitisation of Aircraft Leases (2 Hours)

Brought to the market in April 2001, this successful securitisation of aircraft leases shows how the rating agencies overcame the problems of a concentration of one industry group. In addition, given the relative illiquidity of the underlying securitisation, the case study looks at detail how these are dealt with. As an exercise, the delegates will be asked to construct how the transaction is structures and how much capital relief the structure brought the seller.

Click here to view PDF of PowerPoint file from module

Argon Capital (1 hour theory/2 or 10 hours practical) 

Argon was the first synthetic CDO (also credit default swap) undertaken by UK building society under an amendment to Building Societies Act 2001 for hedging (but not leveraging) credit risk. The purpose was to release regulatory capital on portfolio of 100% risk weighted corporate bonds. The case study looks at the rational behind the transaction and how it was put together and rated. The practical session can either be structured as a review of the cash flow model used to determine the levels of credit enhancement or a complete build of from scratch of the same cash flow programme.

Click here to view PDF of Excel workbook from module

AEOLOS S.A. (2 Hours)

This is a bankruptcy remote SPE domiciled in Luxembourg . Proceeds of the note issuance will be used to purchase receivables due from the European Organisation for the Safety of Air Navigation (Eurocontrol) in relation to the collection of payments from airlines for air-traffic control services provided by the Hellenic Civil Aviation Authority (HCAA).

The case study will look at the different risks and mitigants in the structure as well as how much and where the receivables are generated.

Click here to view PDF of PowerPoint file from module

MSF Funding (2 Hours)

MSF Funding is a bankruptcy-remote Delaware limited liability company, will issue the notes. MSF Funding is owned by MSF Intermediate Holding Ltd an established provider of medical equipment financing in the U.S. The lease contracts were either originated by Medical Systems Finance. The purpose of the case study is to demonstrate how country risk is dealt with in a securitisation structure. In addition, we analyse interest rate, servicer and foreclosure risk.

Click here to view PDF of PowerPoint file from module

Pakistan Telecom Corporation Limited  (2 Hours)

The transaction covered in this case study was a private placement done in 1997 by Pakistan Telecom Company Limited (“PTCL”). At the time of launch it was rated BBB- by Standard & Poor’s and Duff & Phelps (now Fitch Ratings). Although it now rated BB, this was on the back of the deterioration of the sovereign rating of Pakistan (at the time B+). Bear in mind that there is no publicly available rating report for this deal as it was a private placement. This case study was written by as part of a research piece.

During the exercise the delegates will be asked to:

• Read the case study trying to understand where the inherent weakness were in the assets and how the structure addressed them.

• Using the diagrams and pre-formatted labels, add the lines for each label where a continuous line is a cashflow movement and a broken line is an instruction.

• Answer the questions at the end of the exercise. All the information you need is contained within the paper

Click here to view PDF of PowerPoint file from module