Securitisation is an innovative financing tool offering off-balance sheet financing tailored to meet client needs across a wide range of industries. It can be used in a variety of financing situations with existing or future receivable cash flows. Securitisation is the process whereby assets are removed from the balance sheet of the originating company and sold into a special purpose vehicle. The originator continues to service the assets and maintains a direct relationship with their clients. The securitisation vehicle issues highly-rated securities collateralised by the pool(s) of assets. Interest on the securities is met by the cashflow generated by the assets. What assets can be securitised? Securitisation suits a variety of asset types with predictable, stable cash flows including: mortgage loans, credit card receivables, automobile and equipment loans and leases and corporate trade receivables. The ideal receivable pool to be securitised is well diversified with strong and stable performance characteristics, such as delinquencies, losses, and dilutions. A minimum track record of 3-5 years is generally required. Who can securitise? Any originator of assets with a track record of predictable cash flows is a suitable candidate, including both privately and publicly held companies. The originator should have a strong asset servicing capability and adequate equity position. No rating is required for a company to securitise its assets since securitisation relies on the cash flow of the pool of assets for repayment and generally does not have recourse to the company.
		There are many advantages to securitisation when compared with more traditional bank financing, as is outlined below: Attractive rates. Participants gain access to the efficiencies of the capital markets, which have historically provided more favourable funding costs. Committed Funding. Securitisation can provide committed facilities to purchase eligible receivables. Flexibility. Securitisation facilities are easily amended or expanded to meet a seller’s changing needs and business conditions. Off-Balance Sheet. Securitisation enables companies to fund their accounts receivable off-balance sheet, reducing leverage. Non-recourse. Unlike traditional corporate credit facilities, Securitisation facilities are non-recourse to the seller and may only rely on collections of receivables as the source of repayment. Few Financial Covenants. Securitisation facilities generally have fewer financial covenants than bank credit facilities since repayment relies on collections rather than the seller’s general financial capacity. Anonymity. Securitisation can provide an anonymous means to access the commercial paper market as the seller’s participation in the program is not disclosed to Investors. Maintain Existing Relationships. A seller’s existing banks can be involved as liquidity providers in a securitisation transaction.