Generic term used for debt securities issued as part of a securitisation transaction.
Process by which the principal amount of a liability is progressively reduced over time. Asset-backed securities (ABSs) which, in addition to paying interest, reimburse investors for an amount of the principal of the bonds issued; this is known as the “depreciable” amount. Depreciation often differs from an “in-fine” repayment in which repayment of the entire principal is made at maturity. Normal depreciation differs from early prepayment, which is associated with the repayment of the principal prior to its scheduled settlement date.
Company or public entity (Treasury Department, municipality, public company), which assigns the debts to the securisation vehicle.
Auditors perform annual audits on the SPV management company and play a fiscal consulting role on the financial package.
Rules defining the allocation of cash flows in the SPV. Generally, once all the fees have been paid, the remaining sums are allocated to different holders of all the securities issued in the framework of a transaction. These rules are defined prior to issuing the debt securities.
Entity responsible for monitoring receivables, collecting financial flows from receivables, and implementing the steps necessary to recover them in the event that they are unpaid or defaulting. Generally, the Assignor performs this role.
Improving the level of security of issued securities. It can be interior (overcollateralisation, issuing senior or subordinate securities) or exterior (liquidity lines, guarantees).
Risk that a lender will not be reimbursed or will be reimbursed for a lower amount, or that it will be repaid over a longer period of time than originally agreed.
Physical person or company that holds a debt.
Company or person in debt. In the case of mortgage-backed securities, the debtor is the physical person to whom the mortgage has been granted.
Unit or bond issued by the SPV in order to collect the funds necessary to acquire the receivables. The financial flows of the debt securities are backed by those originating from the receivables.
Failure by a party (in terms of a contractual agreement) to fulfil its contractual obligations, i.e. a breach of a contractual agreement.
Receivables whose accounts are in arrears and which are therefore liable to be declared irrecoverable or liable to lead to dispute management.
Financial institution responsible for holding evidence of the securitised receivables (identity of the receivables, transfer deeds, etc.).
Checks and controls that a potential buyer performs prior to an acquisition or making an investment decision; in the USA, a broker must perform these checks before selling securities to investors.
List of required conditions so that a debt held by an assignor can be securitised.
External enhancement mechanism for securities issued by the SPV, which comprises a discovery contract concluded with a local bank. It ensures timely payment of the debt servicing of debt securities issued in the event of late receipt of financial flows from the receivables.
Structure in which the assets exceed the liabilities. Overcollateralisation is used as a form of credit enhancement in some asset-backed transactions. For example, if an issue of 20 billion FCFA of securities can be enhanced by a group of assets valued at 21 billion, the resulting overcollateralisation of the securities is 5 percent.
Maturity of an unpaid bond on a specified due date.
Agency responsible for evaluating the credit risk of debt securities. The ratings agency evaluates the defaulting probability and the recoverable amount in the event of default in each class of issued securities, and gives a corresponding rating for the quantified credit risk. This exercise is repeated every year i.e. until the securities have matured.
A right held by an individual, known as a “creditor” against an individual, knowns as a “debtor” who owed the provision of a service.
Debt securities whose underlying comprises commercial mortgage loans.
Debt securities whose underlying comprises commercial mortgage loans.
Security (unit or bond) whose payment takes priority over all other payments (subordinate securities, management fees, commission) made by the SPV. Due to their nature, priority securities have the lowest default risk.
An ad hoc financing vehicle created to acquire the receivables from the assignor and issue the securities on the market. This intermediary (between the assignor and the investors) guarantees the successful completion of the securitisation transaction in the event of default by the assignor.
Company which manages securitisation transactions, as well as accounting matters.
Security (unit or bond) whose payment is subject to prior payment of the higher class. Therefore, subordinated securities suffer first in the event of the non-payment of the receivables. Often, the most subordinated securities are bought back by the assignor in order to bear the initial risk of non-payment of its debts.
Supervisory Authority issues regulations and ensures compliance with them. In particular, it is responsible for examining and approving applications for authorisation for Management Companies, Special Purpose Vehicles and approving prospectuses.
A legal mechanism used to transfer the Assignor’s receivables to the SPV in a simplified manner.
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