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Using Securitization as a Corporate Funding Tool

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Using Securitization as a Corporate Funding Tool

QFinance,

5 Minuten Lesezeit
5 Take-aways
Audio & Text

Was ist drin?

Credit rating agencies and investment bankers can turn a BBB-rated company’s assets into AAA-rated funding.

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Editorial Rating

8

Qualities

  • Comprehensive
  • Analytical
  • Innovative

Recommendation

This concise report from corporate finance expert Frank J. Fabozzi makes the case that securitization is still a good funding option for companies. His clear, informative primer explains the alphabet soup of securitization terminology (SPE, CDO, ABS, MBS) and shows nonfinancial firms how to lower their cost of debt while better managing their risk. getAbstract believes that corporate treasury and finance executives considering a dip into the securitization market will find this useful introductory text delivers a good return on their time investment.

Summary

For companies looking to raise funds, securitization is an alternative to directly issued corporate bonds with two primary advantages: First, securitized bonds can attain a better credit rating than that of company-issued bonds, which means lower interest rates on the debt. Second, through the sale of company assets to legally distinct special purpose entities (SPEs), securitization transfers risk from the company to bondholders. “Securitization is the process of creating securities backed by a pool of loans or receivables.” Financial institutions use their mortgage loans to create mortgage-backed securities (MBS); their retail...

About the Author

Frank J. Fabozzi is a finance professor at France’s EDHEC (École des hautes études commerciales du nord) and the author of several well-known books on finance.

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