ch capital securitizations

7/31/2019 CH Capital Securitizations

1/19

CHCapital

Partners

LLC

SecuritizationMarket

By

SokH.

Cordell

Sr.

Managing

Director

Knowwhoyouareworkingwith

StrivingtohelpSmallBusinessandMiddleMarketstocreatejobsforourfellowAmericans


2/19

WhatIsSecuritization?

Securitizationis

the

pooling

of

cash

flows

and

the

issuance

of

securities

backed

by

underlyingassets

Therepaymentofsecuritiesissolelydependentontheperformanceoftheassets

Securitizationdelinksthecreditriskoftheissuerfromthesecuritization

transaction


3/19

Typesofsecuritization

Borrowers

(Obligors)

Originator

(Bank/FI)

SPV

CMBS

Securities

Liquidity

SupportCredit

Enhancement

Receivables

Loan

Cash

Securities

SellReceivablesCash

Investors

CreditMarket


4/19

TypesofSecuritization

Residentialmortgage

backed

securities

(MBS)

Assetbackedsecurities(ABS)

Collateralizeddebtobligations(CDO)

Commercialmortgagebackedsecurities(CMBS)

Futureflowsecuritization


5/19

RequirementsforSecuritization

Legalenvironment

Accountingenvironment

Regulatoryenvironment

Taxenvironment

Backofficesystems/Informationsystem

Stronginvestordemand


6/19

WhySecuritizeAssets?

Efficientfunding

Lowercost

Alternativeinvestorbase

Issuerscreditratingbecomesirrelevant

Improvingbalancesheetstructure

Improvescapitalutilization

Releasescapital

Arbitrage yield

and

term

Enablesbetterutilizationofresources

Riskmanagement

Dressupaccountingprofitsiftruesalecriteriaissatisfied


7/19

BenefitstoInvestors

Bettersecurity

Greatermoralresponsibility

Createinstrumentstomatchinvestmentobjectives

Betterandmoreresilientcreditratings


8/19

RisksInSecuritization

Tranching,Cashreservesover collateralization

Risk

CreditRisk

RecoveryRisk

LiquidityRisk

PrePayment&YieldRisk

RiskMitigant

Tranching,Cashreserves

overcollateralization

Loan

to

Value

(LTV)

Asset

DepreciationRates

LiquiditySupport

PortfolioSeasoning


9/19

SecuritizationinMars?

Predominantlyused

for

auto

leases

Notsecuritization,butAssetBackedLending

Notrue

sale

>On

Balance

Sheet

financing

Thecreditratingofthetransactionislinkedtotheissuerscreditrating

Comingling

risk

of

cash

flows?


10/19

CurrentModelInMars

Trust

CMBSSecurities

Borrowers

(Obligors)

Originator

(Bank/FI)

Credit

Enhancement

Receivables

Loan

Recourse

Pledge

ReceiptsCash

Cash Securities

CreditMarkets


11/19

RiskManagementThroughSecuritization

Spreadingprofits

through

various

different

level

of

production

of

CMBS

8%Loan

Service&Collection

Funding

Originate 1%

6%

1%

Highest

Commissionisthe

fundingspreadServicingislong

termincome

generation:5to10

years


12/19

BasicCDOStructure

Bank SPVSeniorNotes

MezzanineNotes

Equity

Loans

CashFunds

Coupons&

principal

CDOSecurities

Credit

Markets


13/19

ImpacttoOriginator

Notexposed

to

Credit

&

Interest

Rate

risk

Netincomewouldbeclose duetooriginating&servicingfeesaswellastheexcessspread

Cashflowimprove

Betterutilizationofcapitalinfrastructure

ImprovesROA/ROE


14/19

ImpedimentsforSecuritizationinSriLanka

FinanceLeasing

Act

ConcernsonthelossofParatePowers?

TransactionCost

RegistrationProcedure

Poorinformationsystems

Lackofeducation


15/19

PracticalIssuesinUndertakingSecuritization

Greaterdisclosure

of

information

Internalsystemsmaytaketimetogeneratetheinformationrequired

Initialcostandtimeinvolvedinthefirsttransactionwillbehigherthanother

formsoffinancing

Lessflexiblecovenants


16/19

TheWayForward

FinanceLeasing

Act

needs

to

be

amended

to

facilitate

securitization

NewSecuritizationAct

Transactioncost

RegistrationProcedures

Clearaccounting

treatment

for

securitization


17/19

TheWayForward

Cleartax

treatment

for

securitization

Internalinformationsystemsneedtobemodified

Investorsneedtogetusedtotakingontheriskofthesecuritizedassets

Investorsneedtobepreparedtoacceptunscheduledcashflows

RMBScouldbeundertakenundertheexistinglegalframework


18/19

2008&2009FinancialCrisis

Sowhere

are

we?

SecuritizationMarkethasshrunkfrom$280Bin2007to$44Bin2011

Sincethemarketreceivedsomanydefaultsandstructuralcollapseofthe

wholecapitalmarkets,itwillbemanyyearsbeforethewereachthepeakof

2007.

Manyofthetranchesarebeingbrokenupandrestructuredtochangethe

ratingoftheloans,andtoday2012,JPMorganretranched defaultedloansas

azerocouponCMBS.

Sois

the

market

going

to

be

efficient

or

are

we

still

waiting

for

the

credit

to

thaw

SincetheBankregulators,FDICandOCCarepressuringbankstocleanuptheir

balancesheets,itisprettyclearthatwewillnotseethesamecreditmarkets

forat

least

adecade.

Didlackofcreditcausetherecession,andwhatcycleareweinforthis

decade?


19/19

Disclosures

The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the

judgment of the author as of the date of the report and are subject to change without notice. Information has been obtained from sources believed to be

reliable, but its accuracy and completeness are not guaranteed. CH Capital Partners LLC a member of Cordell Financial Group is an equal opportunity lender.

The solutions discussed may not be suitable for you, even if your personal situation is similar to the example presented. Investors must make their own

decisions based on their specific investment objectives and financial circumstances. It should not be assumed that the recommendations made in this

situation achieved any of the client's goals mentioned. This example is hypothetical and does not represent any specific clients, investments or strategies.

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus,which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest. Variable annuities are sold

by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. Withdrawals from an Annuity before 59 1/2

may incur 10% tax penalty. All guarantees from an Annuity are based upon the claimspaying ability of the insurance company. CFG or any of its affiliates

reserves the right to share information between various businesses that CFG is affiliated with. It will still concur with the privacy act.

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