Securitisation

The Challenge Securitisation is a flexible, efficient and lower-cost way of raising capital. It works by grouping together assets with predictable cash flows or rights to future income streams (such as mortgages, loans, Trade receivables or even royalties) and turning them into bond-style securities that are then sold to investors. Securitisation provides a number of benefits for each party involved. Investors enjoy securities that are relatively stable, offer a good return on investment and are often guaranteed by a third party. Securitisation also allows banks to obtain financing for customers without extending loans. Perhaps the greatest benefits, however, are available to the original owner of the assets, who can: access low cost capital without bank loans, additional equity or restrictive covenants convert non-liquid assets to cash inexpensively and quickly garner "AAA" rating on most of the financing regardless of the client's credit rating diversify funding sources and investors, lowering the overall cost of capital and funding risk transfer risk to third-party investors match cash flow on assets and liabilities to eliminate interest rate risk Securitisations can therefore make sense for many reasons, whether a company has substantial capital needs, is seeking to improve its financial performance measures, finds itself constrained by its credit rating, or want to transfer non-core risks to third parties (for example property or sovereign risks). The Luxemburgish Securitisation law of March 9th, 2004, which provides a flexible legal framework for workable structures at reasonable costs is a real opportunity in that context. The new Law allows for a high degree of flexibility when structuring a securitisation transaction through Luxembourg, in terms of: Tax neutrality Securitisation vehicles (SV's) Regulation of securitisation vehicles Classes of assets Forms of securitisation transactions Compartment segregation In addition the Law provides high investor protection via the bankruptcy remoteness, a fiduciary representative and a Custodian. PwC Solution Our Securitisation Group provides specialised services to all parties involved in such transactions (originators, issuers, arrangers, investors and service providers) and for all stages as well (from initial discussions with clients, to financial planning, implementation and follow up). By combining financial skills with technical expertise, we are able to maximise the benefits that securitisation offers to our clients. We focus on the particular needs of each client. We do not push pre-set solutions. We aim simply to help companies achieve their set objectives at the lowest costs, while preserving the highest level of flexibility. Our professional service teams draw on the expertise of the entire firm. This means we can offer clients expert advice in operations and systems consulting, feasibility analysis, financial reporting, risk management, and tax and regulatory consulting. We provide a range of services to originators from beginning to end of transactions, these services are summarised in the following areas of the securitisation process: Feasibility studies A feasibility study ensures that securitisation supports your funding objectives and business strategy. We can assist you in evaluating the cost and benefits of securitisation, whether a conduit or stand alone transaction, and ensure that it is appropriate to your particular circumstances. Typically we run workshops for client staff involved which help to rapidly mobilise the project and surface potential issues. Operations Review and Infrastructure Preparation Invariably practical problems arise in a company's ability to provide historical data and information concerning the asset pool with their ongoing ability to meet servicing and reporting requirements. Drawing on our previous experience of securitisations and extensive IT resources, we can help clients perform a review designed to identify likely problems and implement quick and effective solutions. Collateral Analysis Before presenting asset-specific information to rating agencies, originators should undertake a complete review to confirm historical performance of the assets being securitised. Transparent review and analysis of underlying collateral for a transaction can save an originator money by translating into a higher rating by the credit agencies. Preparation for Rating Agencies Review After our in-depth analysis of our clients' collateral, systems and operations, we will work closely with the client to ensure the best presentation of their position to the rating agencies who, in turn, will determine the overall funding costs by assigning ratings to the offered notes. Structuring consulting and advice Because investor demand decides the structure that will ultimately prevail, we will work with your investment bank to ensure that the structure chosen is the most efficient and cost-effective for all parties involved in the transaction. Pre-Closing Services Our traditional securitisation services revolve around comforting information contained in the offering circular or marketing materials. These services often begin with data preparation and collateral file due diligence and continue through comforting collateral stratification tables and data attributes listed in these documents. Our transaction closing services team provides analytical and cashflow modeling services in a timely manner, fully supporting each transaction. Post-Closing Services The Global Structured Finance Group at PwC was the first to offer an integrated software solution for the structuring of securitisation transactions on the pre-closing side and master servicing/trustee management of the deal on the post-closing side. Accordingly, our European Securitisation Group will customise software components for originators' post-closing needs. In relation to services provided to Investment Banks in support to transactions, we provide the following: Accounting and Regulatory Advice, Data Services, Asset Pool / Collateral Due Dilligence, Cash Flow Modelling, Offering Circular Comfort, Investor Reporting and ongoing Deal Management, SPE Auditing Services, and Back-Up Services & Collections. Benefits for you In Luxembourg a dedicated Securitisation Group understands your business problems. In addition the Luxembourg practice is supported by an international network that provides unique and fully-fledged solutions to address Securitisation issues. And as a result we are able to add value at all key stages of the process: identifying and evaluating all financing alternatives achieving the lowest cost of capital by minimising both transaction expenses and the costs of interest and credit enhancement performing cash flow and sensitivity analyses that integrate the transaction into the client's operations providing independent data and objective recommendations so management can make informed decisions validating accuracy of portfolio characteristics and related reports, and structuring calculations managing due diligence reviews advising on accounting features of the securitisation vehicle ensuring tax neutrality Throughout the process we ensure that you maintain control of your deal. Why PricewaterhouseCoopers PricewaterhouseCoopers has been involved in over 1000 securitisations and other structured financings totaling over $300 billion. As a Luxembourg market leader with strong local and international expertise together with the support of our international network, we provide you Multicompetency teams (Tax, Advisory, Regulatory, Assurance) covering the various aspects of Securitisation. In addition, by being a PwC client for your Securitisation project you will also benefit from our knowledge sharing initiative and research both in Luxembourg and in Europe.