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Asset-backed securities field guide: Difference between revisions
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This is a fairly insurmountable problem for widely-held, really publicly traded ABS transactions like [[securitisation]]s and [[CLO]]s. Noteholders just have to take a view, that the people originating and sponsoring the deal are good people, and will not take the proverbial. | This is a fairly insurmountable problem for widely-held, really publicly traded ABS transactions like [[securitisation]]s and [[CLO]]s. Noteholders just have to take a view, that the people originating and sponsoring the deal are good people, and will not take the proverbial. | ||
But in smaller scale repackaging deals, things are different. These tend to be tailored deals made to order for a specific investor. They are not listed | But in smaller scale repackaging deals, things are different. These tend to be tailored deals made to order for a specific investor. They are not usually listed or publicly quoted, the original investor takes down the whole deal and, for the most part, sits on it, perhaps [[securities financing|financing]] it in the market, but staying long the economic risk of the transaction. | ||
These trades are ''in concept'' tradable, but they don’t really trade: no-one in her right might would actually buy one in the [[secondary market]] without all the [[due dilly]], [[negotiation]] and documentation you’d expect for an OTC [[novation]]. | |||
Using the cumbersome note mechanics to manage valuation disputes, amendments, and unexpected contingencies of the sort that often arise on early unwind is possible, but there’s generally a better means of resolving these, bilaterally, with the original purchaser standing in for “the noteholders for the time being”. This is ''theoretically'' problematic — what if the original purchaser has in the mean time on-sold all or part of its holding? — but not in the ordinary course practically so as, for the reasons given, it won’t have. And it can be resolved by some representation, required at the time of any consultation, that it ''is'' the sole noteholder, or speaks for all outstanding noteholders, or in any event [[indemnifies]] the arranger and transaction parties for lossed caused from anything done at its suggestion should it turn out not to be. | |||
{{Sa}} | {{Sa}} | ||
* [[Swap history]] | * [[Swap history]] | ||
*[[Asset-backed security]] | |||
{{ref}} | {{ref}} | ||