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Asset-backed securities field guide: Difference between revisions
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Hence the manifold varieties of asset-backed security: the [[securitisation]], the [[collateralised loan obligation]], the [[collateralised debt obligation]], the [[credit-linked note]], and the humble [[Repackaging programme|repackaging]]. | Hence the manifold varieties of asset-backed security: the [[securitisation]], the [[collateralised loan obligation]], the [[collateralised debt obligation]], the [[credit-linked note]], and the humble [[Repackaging programme|repackaging]]. | ||
===Challenges across the bridge=== | ===Challenges across the bridge=== | ||
But, as ever the immovable object of [[substance]] meets the irresistible force of [[Substance and form|form]]. Simply securitising a bilateral contract doesn’t take away the natural nervousness counterparties have to its customised terms. If they are connected bilaterally and a lender can see the whites of the borrower’s eyes it can intervene, push back and make representations should the borrower go about exercising its rights, calculating its rates, or performing its obligations in an unconscionable way. There is a communication channel through which such differences of opinion can be aired and resolved. | |||
But once that relationship is intermediated by a traded note, that channel goes away. The borrower need not even know who its lenders are. Its lenders may change, at any time, and there may be a ''host'' of them. What if they disagree? What if some care, and some do not? What if you can’t get some of them to pick up the phone? | |||
{{Sa}} | {{Sa}} | ||