Transcript Slide 1

DACT
Securitisation:
An efficient alternative funding tool
Maurice Jongmans
Rabobank International
Corporate Origination and Structuring
Rabobank International1
Definition
Illiquid pools of assets which are packaged, ring-fenced, underwritten
and distributed in the form of liquid Asset Backed Securities.
The cash flows of the underlying assets are the prime source for the
payment of interest and principal of the Asset Backed Securities.
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…Bold statement?
“After the 2008 Credit Crisis, Securitisation has no raison d'être”
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Issuance Trends – Term Securitisation
Securitisation still holding strong although at a somewhat lower level
Issue size per year in EUR billion
YTD 2011 by Asset Class
2%
6% 0%
900
RMBS
10%
802.5
CDO
750
16%
66%
Other
ABS
Auto
Credit
Card
600
469.2
Source: DB, Bloomberg
458.4
428.6
450
YTD 2011 by Country
364.7
300
248.6
9%
5%
31%
Netherlands
UK
Spain
10%
150
Italy
17%
28%
0
2006
Source: DB, Bloomberg
2007
2008
2009
2010
YTD11
Other
Germany
Source: DB, Bloomberg
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…then perhaps?
“Securitisation is less efficient”
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Pricing of term securitisation first half 2007 versus 2011
Credit Margin of an AAA-bond; being the most senior position of the transaction
Nov. 2011
2007
Residential Mortgages Backed Securities
120 bps
11 bps
Commercial Mortgage Backed Securities
400 bps
18 bps
Auto Loans
65 bps
45 bps
Collateralised Loan Obligations
350 bps
25 bps
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For corporate securitisation, let’s turn to ABCP-market
The so-called Asset-Backed Commercial Paper (ABCP) Market in short:
 Commercial Paper with a tenor less than 360 days
 Frequent issuance by bank sponsored ABCP conduit
 Size: Currently around USD 380 billion
 Short-term ratings A-1 / P-1 (consistent with a long term A / A2 rating)
 Backed by assets and cash flows
 Matches short-term, variable and/or smaller portfolio’s of receivables
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ABCP Conduit Securitisation: an overview
Key Considerations
Transaction Size
Asset Type
Rating
Advance Rate
Flexibility
Time Frame
Usually starts with EUR 40 million
Assets suitable: trade receivables, lease portfolios, auto loans, consumer loans and film rights
Transaction structured to short term A-1 / P-1 ratings
Typically 85% - 90% of eligible receivables



New subsidiaries, new jurisdictions can be added post closing
Accommodates multiple currencies
Allows for fluctuating pool sizes and seasonality
2-3 months to closing and funding from mandate and complete data set
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ABCP – market: very liquid market for client driven deals
Total Outstanding in USD billions
from January 2001-October 2011
1,400
1,200
Rise and fall
of SIV Conduits
1,000
800
600
400
200
0
Source: FED, Rabobank
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ABCP – market: and efficient!
As example Rabobank’s own client conduit Nieuw Amsterdam
Cost of Funds (1 year) vs. 1, 3 months US LIBOR
Cost of Funds (1 year) vs. 1, 3 months EURIBOR
1.8%
0.45%
0.40%
1.5%
0.35%
1.3%
0.30%
0.25%
1.0%
0.20%
0.8%
0.15%
0.5%
0.10%
0.3%
0.05%
0.00%
Sep/10
Dec/10
1m USD Libor
Mar/11
3m USD Libor
Jun/11
Sep/11
USD CP Rate
Average 1 year US LIBOR and CP rate
0.0%
Sep/10
Dec/10
1m Euribor
Mar/11
3m Euribor
Jun/11
Sep/11
EUR CP Rate
Average 1 year EURIBOR and CP rate
1 month LIBOR
0.23%
+/+ 9bps
1 month EURIBOR
1.07%
-/- 20bps
3 month LIBOR
0.29%
-/- 0bps
3 month EURIBOR
1.27%
-/- 41bps
EUR CP Rate
0.29%
EUR CP Rate
0.86%
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ABCP-securitisation structure
Typical Conduit Securitisation Structure
Basic Concept
From the Corporates
perspective
Legal: True Sale
Risk Transfer: Non Recourse
Account
Debtors
Receivables
Liquidity
Trustee
Facility
Accounting: On Balance
Sheet (Standard)
Sales
Sale of
Receivables
Corporate
Proceeds
CP
Proceeds
Ownership Interest
SPV
(Purchaser)
Limited Recourse
Loan Facility
Nieuw
Amsterdam
ABCP
Investors
CP Notes
rates A-1/P-1
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ABCP-securitisation: Basic Concept
 Usually a revolving sale of assets to an SPV per month, bi-weekly, weekly or daily
 Ideally, portfolios are highly diversified but larger concentrations can usually be accommodated
 Risks of the portfolio are substantially transferred, although the Borrower holds a first loss position in
the portfolio
 Investors look to the assets for repayment, not to the Borrower, and are protected from the applicable
credit enhancement
 No change to the Borrower’s credit and collection policies or cash management procedures
 Corporate remains servicing portfolio
 Going concern no notification to debtors of the sale of receivables
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ABCP-securitisation structure: Funding Side
Liquidity
Facility
Account
Debtors
Liquidity Facility:
- Sponsored by banks
- To support liquidity of the ABCP
paper
Trustee
Receivables
Sales
Sale of
Receivables
Corporate
Proceeds
SPV
(Purchaser)
Proceeds
Nieuw
Amsterdam
CP Notes rates
A-1/P-1
ABCP
Investors
ABCP Investors
- Institutional Investors
- Name of corporate unknown to
investors
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ABCP-securitisation structure: Corporate Side
Securitisation structure
Account
Debtors
Trustee
Liquidity
Facility
Sale of
Receivables
Corporate
Proceeds
SPV
(Purchaser)
Nieuw
Amsterdam
CP Proceeds
CP Notes
rates A-1/P-1
ABCP
Investors
Relation between Corporate and SPV

Receives purchase price (on average 85-90% of the total receivables portfolio)
 Purchase price is determined based upon historic performance; defaults, write offs, dilution, DSO

After collection of 100% of outstanding receivables, the remaining 10 - 15% after interest deduction and cost will flow back to the
company
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Factoring vs. Securitisation
FACTORING
Program Limit
Commitment
Differs, usually a max. of EUR 150 mln
SECURITISATION
From EUR 40 mln, transactions in excess of EUR 1 bn
not uncommon
If debtors are offered
1-year commitment, but 2-or 3 year facilities possible
Debtors
Cherry picking – in most cases ‘household names’
The portfolio approach
Funding
Bank Funding
Funding in Capital Market
Static
Dynamic
One country per facility
One or more countries
Credit insurance usually is required
Normally no credit insurance needed
Advance Rate
Number of Countries
Insurance
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ABCP-securitisation: Benefits & Disadvantages
Advantages
 Non-rated companies can tap the international capital markets
 New, incremental source of liquidity – diversification of funding
 Term commitments are possible
 Syndication can address wallet sizing concerns of other relationship banks
 Potential off balance sheet solutions can be explored
 Specific financial covenants typically not required but cross default to existing loan covenants
Disadvantages
 Securitisation is not a product for all
 for example: a smaller portfolio diversified over multiple countries can be costly
 Advance rate depends on quality and availability of historical receivables performance data
 Although it does fit well with other financing in many cases a carve out language may be necessary
 Available assets for bi-lateral bank facilities reduces
 Funding is also dependent on efficiency and liquidity of conduits lenders
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