Example of securitization, Financial Management

The process of securitization can best be understood by taking the following example. Assume that there exists an NBFC which has hire purchase as its major business. Being into hire purchase, the company will definitely have a pool of assets of different maturities spanning a few years. Obviously, these assets would be represented as lease receivables in the balance sheet of the company. That is, the company now has its fund locked-up for maturities spanning over long years facing a liquidity problem and constrained by capital adequacy norms in increasing its scale of business and hence has to raise capital. In such a situation, securitization will help in the transfer of such illiquid lease rentals to the SPV created for that purpose thereby offloading from its balance sheet. The SPV will buy all these lease rentals with 'credit enhancement' clauses at a time and will take care of the receivables when they come. 

Posted Date: 9/8/2012 7:53:59 AM | Location : United States







Related Discussions:- Example of securitization, Assignment Help, Ask Question on Example of securitization, Get Answer, Expert's Help, Example of securitization Discussions

Write discussion on Example of securitization
Your posts are moderated
Related Questions
discuss the applicability of operating cycle and any other financial knowledge to poultry business in uganda

Types of asset-backed securities 1.  Auto Loan-Backed Securities (ALBs) 2.  Credit Card Receivab

discuss the applicability of operation cycle in avegetable growing business

Audit risk Obtain understanding of accounting and internal control systems. Sufficient to plan audit and develop effective audit approach. Professional judgement to

1) According to the IFE (RIP), if U.S. investors expect a 3% rate of domestic inflation over one year, and a 6% rate of inflation in European countries that use the EUR, and requir

FACTORS AFFECTING WORKING CAPITAL NEEDS OF FIRMS A large no. of reasons influences the working capital requirements of firms.  a number of them are as follows: 1. Nature of

WHAT ARE THE TOOLS OR MECHANISMS THAT CAN BE USED TO ACCESS ECONOMIC RECESSION?

explain the significance of operating leverage and financial with the help of example?

QTL Tech has an issue of preferred shares outstanding with a $50 stated value that pays a dividend of 7.5%. There are 325,000 shares outstanding. QTL has not paid preferred share d

discuss the applicability of operation cycle in avegetable growing business