Securitization Law and Practice

Name: Securitization Law and Practice | In the Face of the Credit Crunch
Brand: Kluwer Law International
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In the Face of the Credit Crunch

Jan Job de Vries Robbé(Author)

Kluwer Law International (Publisher)

Published on 8. July 2008

518 pages

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978-90-411-5084-4 (ISBN)

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Securitization-once a fairly straightforward means of offering collateral for investment-has mushroomed into a massively complex area of financial practice. The central role occupied by such risk-distributing products as collateral debt obligations (CDOs), credit default swaps (CDSs), collateral loan obligations (CLOs), and credit derivatives has given rise to one of the most crucial inquiries of our era: Is the financial collapse that threatens the world financial system due merely to rogue traders? Or is there something in the derivative idea itself that spells inevitable disaster? Most important, can we isolate the truly productive aspects of securitization and learn to recognise pitfalls in advance? As always in such ideational minefields, it is the legal practitioners who are expected to provide guidance to distressed investors and asset dealers. Hence this vital new book.

Written from a distinctly practical point of view by Jan Job de Vries Robbé with contributions from Paul Ali and Tim Coyne-all three leading authorities with extensive experience as counsel both in-house and in private practice, in addition to sterling academic credentials-the book sheds clear light on every aspect of today's securitization techniques, including welcome guidance on the following:;

keeping track of exposure to the CDO market; and
evaluating such emerging asset classes as commodity risk, microfinance, and project finance risk.
In the course of the analysis the book proceeds from the relevant framework and guiding legal principles, through key risks and building blocks in securitization transactions, to the various product classes and sub-classes and their differences and common denominators. Non-credit risk and niche products (such as fund and insurance securitization) are also covered. The final chapters are devoted to the applicable rules as laid down in Basel II and International Financial Reporting Standards.

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Content

Cover
Half Title Page
Editorial Board
Title Page
Copyright Page
Summary of Contents
Table of Contents
List of Abbreviations
About the Author
Foreword
Introduction
Acknowledgements
PART I Building Blocks
Chapter 1 Introduction
1.01 Definition
1.02 Rationale
1.02.1 Funding
1.02.2 Regulatory Capital Relief
1.02.3 Arbitrage
1.02.4 Balance Sheet Considerations
1.03 Securitization Types
1.03.1 True Sale
1.03.2 Synthetic
1.03.3 Whole Business
1.04 Asset Classes
1.05 Sub-prime Crisis and the Credit Crunch
Chapter 2 Structure and Documentation
I Introduction
2.01 Introduction
2.02 Chapter Set-up
2.03 Documentation
II The Originator Perspective
A Originator
2.04 Originator
2.05 Asset Selection
2.06 Originate/Warehouse/Distribute (OWD)
2.07 Arranger
B SPV
2.08 Purpose
2.09 No SPV
2.10 Different SPVs
2.11 Jurisdiction
2.12 Bankruptcy Remoteness
2.12.1 SPV Control
2.12.2 Business Restrictions
2.12.3 Note Holders Restrictions
2.12.4 Limited Recourse
2.12.5 Non-petition
2.13 Multiple Issues
C True Sale
2.14 Introduction
2.15 True Sale
2.16 Receivables
2.17 Main Legal Issues
2.18 Assets Assignable under Contract
2.19 Assignment
2.20 Title Perfection Events
2.21 Claw-back
2.21.1 Transaction at an Undervalue
2.21.2 Voidable Preference
2.21.3 Defrauding Creditors
2.22 Addressing Claw-back Risk
2.23 Re-characterization
2.24 Re-characterization in Securitization
2.25 Due Diligence
2.26 Purchase Agreement
2.27 Securitization without a Sale
2.28 Warehouse Facilities
2.29 Re-assignment/Substitution
D Credit Risk Transfer
2.30 Means to Transfer Credit Risk
2.31 Credit Default Swap
2.32 Generic Risks in Synthetic Transactions
2.32.1 Originator Risk
2.32.2 Documentation Risk
2.32.3 Termination Risk
2.32.4 No Recourse
2.33 Green Bottle Structure
2.34 Partially Funded
2.35 Cost Efficiency
2.36 Super Senior Swap
E The Borrowers/Debtors
2.37 Data Protection
2.38 Commingling
III The Liability Side
A The Note Holders
2.39 Note Holders
2.40 Prospectus
2.41 Retail Investors
B Trustee
2.42 Transferability
2.43 Trustee Roles
2.44 Security Trustee
2.45 Security Package
2.46 Deed of Charge
2.47 Context
2.48 SPV Assets
2.49 Trust Deed
2.50 Role
2.51 Discretion
2.52 Liability
C Servicer
2.53 Servicer
2.54 Rating Agency Provisions
D Rating Agencies
2.55 Rating Agencies
2.56 Pre-sale Reports
2.57 Key Rating Agency Terms
E The Notes
2.58 Tranching
2.59 Note Types
F Terms and Conditions of the Notes
2.60 Key Terms
2.61 Waterfall
2.62 Pre-default Waterfall
2.63 Post-default Waterfall
2.64 Issues for Waterfalls
2.65 Redemption of the Notes
2.66 Optional Termination
2.67 Optional Termination in Synthetics
2.68 Mandatory Redemption
2.69 Final Redemption
2.70 Deferred Redemption
2.71 Note Event of Defaults
2.71.1 Failure to Pay
2.71.2 Other Non-compliance
2.71.3 SPV Events
2.71.4 Structural Events of Default
2.71.5 Consequences
2.72 Note Covenants
2.73 Ramp-up
2.74 Negative Carry
G Informing Investors
2.75 Informing Investors
2.76 Financial Reporting
2.77 Reporting in Practice
2.78 Measuring Performance
2.79 Best Practice
2.80 Benchmarking
2.81 Selective Disclosure
2.82 Mis-selling
IV Assets
2.83 Asset Eligibility
2.84 CDO Structure
A Matched Funding
2.85 Matched Funding
2.86 Documentation
2.87 Set-off
2.87.1 Set-off in Securitization
2.87.2 Set-off and Originator
2.87.3 Set-off and Insolvency
2.87.4 Set-off and Account Bank
B Credit Enhancement
2.88 Credit Enhancement
2.88.1 Tranching/Subordination
2.88.2 Over-collateralization
2.88.3 Monoline Insurance
2.88.4 Reserve Funds
2.88.5 Excess Spread
2.88.6 Synthetic Excess Spread
2.89 Choice
2.90 Other Structural Features
2.90.1 Cash Diversion
2.90.2 Turbo
C Static and Dynamic Pools
2.91 Dynamic Pools
2.92 Static Pools
2.93 Replenishment
2.94 Substitution
2.95 Revolving Transactions
2.96 Managed Transactions
2.97 Collateral Manager
2.98 Manager Reports
2.99 Additional Risks
D Balancing Interests
2.100 Balancing Interests
2.101 Aligning the Note Holders
2.102 Aligning the Collateral Manager
2.102.1 Waterfall
2.102.2 Fee Structure
2.102.3 Churning
V Other Structural Risks
A Counterparty Risk
2.103 Counterparty Risk
B Swap Counterparties
2.104 Swap Counterparties
2.105 Rating Agency Reliance
2.106 Interest Rate Risk: True Sale
2.107 Interest Rate: Synthetic
2.108 Currency Risk
2.109 Amortizing Swaps
2.110 Rating Agency Criteria
2.111 Bank Swap Counterparty
2.112 Schedule Adaptations
2.113 Consequences of Early Termination
2.114 Termination Payments
C Collateral Risk
2.115 Collateral Risk
2.116 Addressing Collateral Risk
2.117 Eligible Collateral
2.118 Collateral in Synthetic Deals
2.119 Repurchase Agreement
2.120 Put Option
2.121 Total Return Swap
2.122 Derivative Counterparty Eligibility
2.123 Deposit Bank
D Other Documentation
2.124 Other Documentation
2.125 Cash Management Agreement
2.126 GIC
2.127 Liquidity Facility
VI Execution and Post-Closing
2.128 Execution
2.129 Conditions Precedent
2.130 Legal Opinion
PART II Synthetic Structures
Chapter 3 Credit Derivatives
I Introduction
A Introduction
3.01 Introduction
3.02 Purpose
3.03 Chapter Set-Up
B Trading Credit Risk
3.04 Credit Risk Management
3.05 Adjustment of Contractual Terms
3.06 Guarantees
3.07 Credit Wrap
3.08 Insurance Contracts
3.09 Loan Syndications
3.10 Securitization
3.11 Participations
C Credit Derivatives
3.12 Definition
3.13 Parties to Credit Derivative Transaction
3.14 Characteristics
3.14.1 Trade Credit Risk Only
3.14.2 No Need for Transfer of Underlying
3.14.3 Unfunded and Leveraged Instrument
3.14.4 (No) Relationship with Reference Entity
3.14.5 Flexibility
3.15 Credit Derivatives Market
3.16 CRT Report
3.17 Comparison with Emergence of IRS
3.18 Relationship with Corporate Bond Market
3.19 Common Credit Derivative Products.
3.20 Market Participants
3.21 Liquidity
II Drivers and Risks
A Drivers
3.22 Credit Derivatives Drivers
3.23 Credit Risk Management
3.24 Trading Tool
3.25 Arbitrage
3.26 Regulatory Capital Relief
3.27 Requirements as to Legal Documentation
3.28 Additional Requirements
3.29 Confidentiality
3.30 Transparent Pricing
3.31 Accessibility
3.32 Cross-Sector Transfer
B Risks
3.33 Risks in Credit Derivatives
3.33.1 Counterparty Risk
3.33.2 Concentration Risk
3.33.3 Correlation Risk
3.33.4 Basis Risk
3.33.5 Liquidity Risk
3.33.6 Operational Risk
3.34 Legal Risks
3.35 Authority Risk
3.36 Misrepresentation
3.37 Documentation Risk
3.38 Moral Hazard
3.39 Re-characterization Risk
3.40 Gambling Contract
3.41 Contract of Insurance: Relevance
3.42 Distinguishing from Insurance Contract
3.42.1 No Indemnity
3.42.2 No Insurable Interest
3.42.3 No Proof of Loss
3.42.4 Intention of the Parties
3.42.5 Lack of Recourse
3.42.6 Floodgates
3.43 Mitigating Re-characterization Risk
3.44 Compliance Risk
3.45 Regulatory Risk
III Credit Derivatives Documentation
A Documentation Structure
3.46 Documentation
3.47 ISDA Master Agreement
3.48 Credit Derivatives Definitions
3.49 Confirmations
B Types of Credit Derivatives
3.50 Types of Credit Derivatives
3.51 Credit Default Swap
3.52 Total Return Swap
3.53 Credit Spread Transaction
C Credit Default Swap
3.54 Credit Default Transaction
3.55 Unfunded Notional Instrument
3.56 Cash Flow
3.57 Key Pillars
3.58 Reference Entities
3.59 Identity of Reference Entity
3.60 Successor Entity
3.61 Reference Obligation
3.62 Calculation Agent
D Credit Events
3.63 Credit Events
3.64 Standard Credit Events in OTC Market
3.65 Bankruptcy
3.66 Failure to Pay
3.67 Restructuring
3.68 Contentious
3.69 Multiple Holder Obligation
3.70 Bifurcation
3.71 Repudiation
3.72 Back to Back Transactions
3.73 Soft Credit Events
3.74 Obligations
3.75 Obligation Categories
3.76 Guarantees
3.77 Obligation Characteristics
3.78 Conditions to Settlement
3.79 Credit Event Notice
3.80 Notice of Publicly Available Information
3.81 Notice of Physical Settlement
E Settlement
3.82 Two Forms of Settlement
3.83 Physical Settlement
3.84 Timeline
3.85 Advantages of Physical Settlement
3.86 Delivery
3.87 Deliverable Obligations
3.88 Deliverable Obligation Category
3.89 Deliverable Obligation Characteristics
3.90 Risks in Physical Settlement
3.91 Defining Deliverable Obligations
3.92 Unavailability
3.93 Cheapest to Deliver Option
3.94 Fluctuations in the Market
3.95 CDS and Bondholder Positions
3.96 Move to Cash Settlement
3.97 Cash Settlement
3.98 Prepayment
3.99 Standardization
3.99.1 Master Confirmations
3.99.2 CDS Matrices
3.99.3 Unwinding Transactions
3.99.4 Novation
3.100 Exchange-Listed Credit Derivatives
IV Structured Credit
A Introduction
3.101 Work in Progress
3.102 Structured Credit Products
B Credit Default Swap Products
3.103 Credit Default Swap Products
3.104 First: CDS Variations
3.105 Self-referencing CDS
3.106 Recovery Lock CDS
3.107 Contingent CDS
3.108 Loan-Only CDS
3.109 Constant Maturity CDS
3.110 CD Swaptions
3.111 Second: CDS on Securitized Products
3.112 CDS on ABS
3.113 Documentation
3.114 Credit Events in CDS on ABS
3.114.1 Bankruptcy
3.114.2 Failure to Pay
3.114.3 Failure to Pay Principal
3.114.4 Loss Event
3.114.5 Ratings Downgrade
3.115 Settlement
3.116 Third: Portfolio Products
3.117 Portfolio CDS
3.118 First-to-Default CDS
3.119 Credit Indices
3.120 Settlement Protocols
3.121 Documentation
C Total Return Swap Products
3.123 TRS Products
Chapter 4 Collateralized Loan Obligations (CLOs) and Collateralized Debt Obligations (CDOs)
I Introduction
4.01 CDOs
4.02 CDO in the Squeeze
4.03 CDO Battleground
II Synthetic CLOs
A Introduction
4.04 Definition
4.05 Market
B Drivers and Risks
4.06 Drivers in Synthetic CLOs
4.07 Risks in Synthetic CLOs
4.08 No Contractual Relationship
4.09 Conflicts of Interest
4.09.1 Cherry Picking
4.09.2 Conflict of Interest: Servicer
4.09.3 Conflict of Interest: Originator
4.09.4 Compliance of Reference Assets
4.09.5 Valuation of the Reference Asset
C Structure and Documentation
i Structure and Due Diligence
4.10 Basic CLO Structure
4.11 Preamble Due Diligence
4.11.1 Disclosure
4.11.2 Deliverability
4.12 No Cash Flow Restrictions
ii Documentation
4.13 Documentation Overview
4.14 Credit Events
4.15 Conditions for Settlement
4.16 Settlement
4.16.1 Market Valuation
4.16.2 Actual Recovery
4.16.3 Fixed Recovery
4.17 Total Return Swaps
4.18 ISDA Master Agreement
4.19 Super Senior Swap
4.20 Credit-linked Notes
4.21 Combination Notes
4.22 Terms and Conditions
4.22.1 Note Events of Default
4.22.2 Early Redemption
4.22.3 Waterfall
4.23 Termination Payments
4.24 Collateral
4.24.1 Repurchase Agreements
4.24.2 Contingent Forward Agreement
4.25 Hedges
D Transactions in Practice
4.26 Asset Classes
i Corporate Loans
4.27 Bilateral Loans CLOs
4.28 Regulatory Capital Relief
4.29 Structural Features
4.30 Term Sheet
4.31 Sectoral Credit Risk Transfer
4.32 Bank Intermediary
4.33 Structure
4.34 Documentation
4.35 Settlement
4.36 Jumbo Synthetic CLO
4.37 Diversified Pool of Reference Loans
4.38 Reference Portfolio Characteristics
4.39 Funding and/or Capital Relief
4.40 CLOs in the Asia-Pacific
ii SME Loans
4.41 SME Loans CLOs
4.42 Market
4.43 KfW Platform
4.44 Originators
4.45 Structure
4.46 Typical Transaction under KfW Platform
4.47 Sub-participation
4.48 Listing
4.49 Replenishment
4.50 Cash Settlement
4.51 Trustee
4.52 Early Termination
4.53 Special Features
4.54 Modifications
4.55 Jumbo SME
4.56 SME Loan Criteria
iii Sovereign Loans
4.57 Sovereign Loans
4.58 Aries
4.59 Credit Events
4.60 Conditions to Settlement
4.61 Cash Settlement
iv Project Finance Loans
4.62 Project Finance CLO
4.63 PPP and PFI
4.64 PFI Principles
4.65 Length
4.66 Structure
4.67 Standard Documentation
4.68 Risk in Project Finance Loans
4.69 Further Risks
4.69.1 Availability and Operating Risk
4.69.2 Demand Risk
4.69.3 Supervening Events
4.69.4 Dependency on Monolines
4.70 Eligibility Criteria
4.71 Loan Level Criteria
4.72 First Synthetic CDOs of PFI Loans
4.73 Transaction Structure
4.74 Two Originators
4.75 Reference Loans
4.76 Replenishment
4.77 Credit Events
4.77.1 Bankruptcy
4.77.2 Failure to Pay
4.77.3 Restructuring
4.78 Syndicate
4.79 Valuation Process
4.80 Cash Settlement
4.81 Credit-linked Notes
4.82 Tenor
4.83 Re-characterization
4.84 Regulatory Capital
4.85 Further Transactions
vi Emerging Markets
4.86 Emerging Market
4.87 Emerging Market CLO Risk
4.88 Sovereign
4.89 Multilaterals
4.90 The Role of Local Law
III Synthetic CDOs
A Introduction
4.91 Synthetic CDO
4.92 Rationale
4.93 Differences with CLOs
4.94 Chapter Set-Up
B Managed Synthetic CDOs
4.95 Definition
4.96 Other Debt
4.97 Sovereign Risk
4.98 Geography
i Drivers and Risks
4.99 Drivers
4.100 Arbitrage
4.101 Diversification
4.102 Rating Stability
4.103 Consequences
4.104 Manager Role
4.105 Risks
4.105.1 Managerial Expertise
4.105.2 Manager Discretion
4.105.3 Key Man Risk
4.105.4 Moral Hazard
4.105.5 Fees
ii Structure
4.106 Trading in Synthetic CDOs
4.107 Controls
4.108 Eligibility Criteria
4.109 Trading Gains and Losses
4.110 Re-investment
4.111 Loss Triggers
iii Documentation
4.112 Credit Default Swap
4.113 Responsibilities
4.114 Fee Structure
C Retail CDOs
4.115 Retail CDOs
4.116 Investor Disclosure
4.117 Legal Issues
D Collateralized Swap Obligations
4.118 CSO
i Drivers and Risks
4.119 Key Drivers
ii Structure
4.120 Structural Issues
4.121 Dealers
4.122 Investor Benefit
4.123 Intermediary Swaps
4.124 Bullet Structure
iii Documentation
4.125 Documentation
4.126 Documentation
4.127 Physical Settlement
4.128 Further Terms
4.129 Other Uses of CDS
4.130 Offsetting CDS
4.131 Naked CDS
4.132 Disclosure
4.133 CSA
E Single Tranche CDO
4.134 Single Tranche CDO
i Drivers and Risks
4.135 Tailored Product
4.136 Hedging Technology
ii Structure
4.137 Attachment and Detachment Points
iii Documentation
4.138 Term Sheet
F Structured Finance CDOs
4.139 Structured Finance CDO
4.140 Products
4.141 Market
i Drivers and Risks
4.142 Drivers
4.143 Leverage
4.144 Risks
4.145 Overlap and Correlation
4.146 The Underlying Product: CDS of ABS
4.147 Drivers
4.148 Collateral Managers
4.149 Originators and Issuers
ii Structure
4.150 Structure
4.151 Cross-Subordination
4.152 Collateral Arrangements
4.153 Managing Structured Finance CDOs
iii Documentation
4.154 Diffuse Documentation
4.155 Disclosure
4.156 Amortization
4.157 (Publicly) Available Information
4.158 Credit Events
4.158.1 Bankruptcy
4.158.2 Restructuring
4.158.3 Failure to Pay
4.158.4 PIK Securities
4.158.5 Principal Reduction
4.158.6 Failure to Pay ABS
4.159 Ratings Downgrade
4.160 Rating Agencies Role
4.161 Cash Settlement: Valuation
4.162 Cash Settlement
4.163 Credit-Linked Notes
4.164 Redemption
4.165 Holdback Amount
4.166 Waterfall
4.167 Termination Payments
4.168 Re-characterization
4.169 Insurance
4.170 Parties' Intention
4.171 Mis-selling
4.172 Settlement
4.173 Drafting Process
G Hybrid and Esoteric CDOs
4.174 Hybrid CDOs
4.175 Liquidity Facilities
4.176 Alternative CDOs
Chapter 5 Non-Credit Risk Securitization
I Introduction
5.01 Introduction
II Equity Risk Securitization
A Introduction
5.02 Market
5.03 Drivers
5.04 Risk
5.05 Investor Considerations
B Structure
5.06 Equity Default Swap
5.07 Digital Put Option
5.08 Distinct from a CDS
5.09 Nature of Risk
5.10 Benchmark
5.11 Recovery and Equity Amount
5.12 Transparency
5.13 EDO/ECO
5.14 Securitization of Equity Risk
C Documentation
5.15 Definitions
5.16 Specific Issues
5.17 Market Disruption
5.18 Extraordinary Events
5.19 Overlap
5.20 Disclosure
5.21 Recharacterization
D Transactions in Practice
5.22 Example Transactions
5.23 Public Rating
5.24 ACEO
5.25 Managed Transactions
5.26 Conclusion
III Commodity Risk Securitization
A Introduction
5.27 Commodity Risk
5.28 Market
5.29 Drivers
B Structure and Documentation
5.30 ISDA Framework
5.31 Commodity Swap
5.32 Market Disruption
5.33 Commodity Trigger Swaps
5.34 Securitization of Commodity Risk
C Transactions in Practice
5.35 Apollo
5.36 Cash Flow
5.37 Timing of Losses
5.38 Reference Portfolio
5.39 Portfolio CTS
5.40 Further Transactions
5.41 Magnolia
5.42 Amadeus
5.43 Rating Agencies
5.44 Flexible
5.45 Conclusion
IV Foreign Exchange Risk Securitization
5.46 FX Risk
5.47 Structure
5.48 Prometheus
5.49 Terms
V Derivatives Securitization: Next Steps
5.50 Property Risk Securitization
5.51 Combined Structures
PART III Niche Transactions
Chapter 6 Managed Fund-Style Securitization
I Introduction
II Managed Funds and Debt Returns
III A Secondary Market in Life Insurance Policies
IV Securitizing Life Insurance Policies
V Insurable Interest Risk
VI Securitizing Private Equity Funds and Hedge Funds
VII Conclusion
Chapter 7 Insurance Securitization
I Introduction
II Putting Insurance Securitization in Context
III Catastrophe Bonds
IV Weather Bonds
V Recharacterization Risk
VI Conclusion
Chapter 8 Whole Business Securitization
I Introduction
II Commercial Considerations
III UK Model of Whole Business Securitization
IV Conclusion
Chapter 9 Microfinance Securitization
9.01 Microfinance and Securitization
9.02 Microfinance
9.03 MFIs
9.04 Market
9.05 DFIs
9.06 Securitization
9.07 Examples in Practice
9.08 Different Structures, Similar Problems
9.09 ProCredit
9.10 MFI CLOs
9.11 Bold
9.12 Structure
9.13 Prevalent Risks
9.13.1 Credit Risk
9.13.2 Servicer Risk
9.13.3 Currency Risk
9.13.4 Counterparty Risk
9.14 Credit Enhancement
9.15 VG Microfinance
9.16 Ramp-Up
9.17 The Loans
9.18 Global Microfinance Facility
9.19 Rating Agency Considerations
9.20 Brac
9.21 Assets
9.22 Structure
9.23 Cash Flow
9.24 Considerations
9.25 Risks
9.26 Legal Risks
9.27 The Proof of the Pudding
9.28 Synthetic Transaction?
9.29 Conclusion
PART IV Game Rules
Chapter 10 Regulatory Capital Standards for Securitization
I Introduction
10.01 Introduction
II The Basel II Framework
10.02 Basel Framework
10.03 History
10.04 Basel I
10.05 Basel II
10.06 Minimum Capital Requirements
10.07 Supervisory Review Process
10.08 Market Discipline
10.09 Models
10.10 Standardized and IRB Approach
10.11 IRB
10.12 Regulatory Capital Arbitrage
III The Securitization Framework in Basel II
10.13 Scope
10.14 Risk Transfer Requirements
10.15 Investments and Retained Exposure Charges
10.16 Collateral
10.17 364
10.18 Recognized External Credit Assessment
10.19 Granularity
10.20 External Ratings
10.21 Implicit Support
10.22 Pillar 2
10.23 Pillar 3
10.24 Synthetic Securitization
10.25 Effective Risk Transfer Requirements
10.26 Credit Derivatives
10.27 Solvency Treatment of Collateral and Guarantees
10.28 Maturity Mismatch
10.29 Step-up
10.30 Legal Opinions
IV Implementation of Basel II
10.31 Implementation
10.32 Changes
10.33 Conclusion
Chapter 11 Accounting for Securitizations: The Post-IFRS World
I Introduction
II Securitization: an Australian/European Perspective
III Implications of the Adoption of Ifrs in Australia
IV Application of Uig 112
V Application of Aasb 139
VI General Rules - Sales With 'Strings Attached'
A Should the Derecognizing Principles be Applied to Part or All of a Financial Asset?
B Have the Rights to the Cash Flows Expired?
C Has the Entity Transferred Substantially All Risks and Rewards?
D Has the Entity Retained Substantially All Risks and Rewards?
E Has the Entity Retained Control of the Asset?
F Continue to Recognize the Asset to the Extent of the Entity's Continuing Involvement
VII Recognition of Gains and Losses on Transfer
VIII Securitizations
A Consolidation of SPEs
B Has the Entity Transferred its Rights to Receive the Cash Flows from the Assets?
C Has the Entity Assumed an Obligation to Pay the Cash Flows from the Assets that Meet the Pass-through Criteria?
D Risks and Rewards
E Control
F Continuing Involvement
IX Accounting Analysis of Certain Financing Structures Using Spes
A Example 1. Collateralized Debt Obligations (CDOs)
i Overview of Structure
ii Accounting Analysis - Applying the Flow Chart
iii Consolidation of the SPE?
iv Has the Entity Transferred its Rights to Receive Cash Flows from the Assets?
v Have the Pass-through Conditions been Met?
vi Has the Entity Transferred Substantially all the Risks and Rewards?
B Example 2. Residential Mortgage-Backed Securitizations
i Overview of Structure
ii Accounting Analysis - Applying the Flow Chart
iii Consolidation of the SPE?
iv Has the Entity Transferred its Rights to Receive Cash Flows from the Assets?
v Have the Pass-Through Criteria been Met?
vi Has the Entity Transferred Substantially all the Risks and Rewards?
C Example 3. Trade Receivables
i Overview of Structure
ii Accounting Analysis
a Consolidation of the SPE?
b Has the Entity Transferred its Rights to the Cash Flows?
c Have the Pass-through Conditions been Met?
iii Has the Entity Transferred Substantially all the Risks and Rewards?
iv Has the Entity Transferred Control of the Asset?
D Example 4. Credit Linked Notes
i Overview of Structure
ii Accounting Analysis: Consolidation of the SPE?
iii Has the Entity Transferred its Rights to Receive Cash Flows from the Asset?
iv Have the Pass-through Criteria been Met?
X Has the Us Moved Yet?
XI Us Accounting Overview
A Sale Criteria
i Legal Isolation
ii Right to Pledge or Exchange
iii Effective Control Criteria
B Current Developments Impacting the Sale Criteria
XII Consolidation
XIII Qualifying Special Purpose Entities (QSPEs)
A Demonstrably Distinct Nature of a QSPE
B Activities of a QSPE
C Assets a QSPE May Hold
D Selling of Noncash Financial Assets Held by a QSPE
XIV Current Developments Impacting Qspes
XV Variable Interest Entity
XVI Variable Interest Entities
XVII Determining Consolidation of Vie Based On Variability
XVIII Decision Tree to Determine if Sale or Secured Borrowing
XIX Initial Accounting/Gain-on-Sale Calculation
XX Impact of Proposed Changes
XXI Subsequent Accounting
XXII Conclusion
XXIII Post Script
Index
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System requirements

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Schweitzer Fachinformationen

Securitization Law and Practice

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System requirements