Corporate benefit

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Repackaging vehicles enter into whopping great secured Note issuances, and hedge them with equally whopping great swaps, while earning a relatively modest “corporate benefit”, in the form of a nominal fee. The company satisfies its “commercial objective” in its own terms as a profit-seeking corporation, by earning this (modest) “corporate benefit” fee for each transaction.

The reason the directors can concludes that these transactions are “in the company’s best interests” because, having banked the corporate benefit, the company obtains legal comfort that it is not exposed to any residual risk from the transactions it enters into in connection with the Issuance (notwithstanding their colossal size): because it is legally ring-fenced from insolvency through failing to meet its obligations under the Notes and hedging instruments by

• The limited recourse provisions and
• The design of the “asset swap package” which will — if your structured it right — yield a financial outcome that exactly equals the company’s liability under the repackaged notes.