Template:Repackaging limited recourse capsule: Difference between revisions

Where there are multi-issuance [[repackaging]] [[SPV]]s, [[secured, limited recourse obligation|secured limited recourse]] obligations are ''de rigueur''. They save the cost of creating a whole new vehicle for each trade, and really only do by [[contract]] what establishing a brand new [[espievie]] each time would do through the exigencies of corporation law and the [[corporate veil]].   

With [[secured, limited recourse obligation]]s there is a ''quid pro quo'': all creditors are known; they are yoked to the same ladder of priorities; they all have agreed to limit their claims to the liquidated value of the secured assets underlying the deal. In return, the [[espievie]] grants them a first-ranking security over those assets — mediated between them by the agreed priority structure — and this stopping any interloper happening by and getting its mitts on the [[espievie]]’s assets.   

The key point to absorb here: ''this is not a material economic modification to the deal''. The line it draws, it draws around ''all'' the assets underlying the deal: the underlying securities, cashflows deriving from them, the [[espievie]]’s rights against custodians and bankers holding them, and its rights against the swap counterparty — everything, tangible or otherwise, of financial value in the transaction is locked down and pledged to secured parties, and the intercreditor arrangements, too, are fully mapped out. This kind of [[limited recourse]], in fact, ''doesn’t'' limit recourse: it ''maps'' practical recourse, exactly to the totality of assets that the issuer has available for the purpose: all it saves is the unnecessary process of bankrupting a shell company with nothing left in it in any case. Secured limited recourse is like a [[nomological machine]]; a [[model]]; it is a simplified account where everything works as it should do, there are no unforeseen contingencies, and all outcomes are planned. <br>