Thursday, 29 March 2012

Parties to Securitization - Level II Fixed Income

1) Originator: The initial owner of the asset (also known as sponsor or seller) who has a loan agreement with the borrowers;

2) SPV: The issuer/trust also known as the SPV is the entity, which would typically buy the assets (to be securitized) from the Originator. The structure keeps the SPV away from bankruptcy of the originator, technically called ‘bankruptcy remote’;

3) Servicer: The servicer is usually the originator, who collects payments due on the underlying assets and, after retaining a servicing fee, pays them over to the security holders;

4) The Investors: The investors may be in the form of individuals or institutional investors like mutual funds, pension funds, insurance companies, etc. They buy a participating interest in the total pool of
receivables and receive their payment in the form of interest and principal as per agreed pattern.

5) The investment bankers: Who assist in structuring the transaction and who underwrite or place the
securities for a fee;

6) The rating agencies: The rating agencies assess credit quality of certain types of instruments and
assign a credit rating;

7) Agent and Trustee: It accepts the responsibility for overseeing that all the parties to the securitization deal perform in accordance with the securitization trust agreement. Basically, it is appointed to look after the interest of the investors.

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