Vocabulary of a securitization operation

• Assets backed securities: operation thanks to which investors acquire the stocks of a securitization organism that holds subjacent assets generating regular incomes such as credit cards…
• Assignor: firm which transfers the claims to the securitization vehicle.
• Cats- bonds: stocks issued by a securitization organism and that are related to the incidence of geological or climatic disasters «earthquakes, hurricanes… ".
• Criterion of eligibility: list of the conditions required so that a claim held by the assignor can be securitized.
• Credit rising: improving of the safety degree of issued stocks. In order to quantify this notion, the operation of securitization calculates a Credit Rising Rate (CRR) to reach. For example, if we want to reach a CRR of 20% on 100 euro of eligible claims, we will put 80 euro under the aspect of priority stocks sold to the investors, and 20 euro as subjected stocks sold back to the assignor. Priority stocks are then safer.
• Debtor: firm or person that has to pay a titrised claim.
• Debt Securitisation Fund (DSF): juridical form imposed by the French law for an operation of securitization. A DSF is a French SPV.
• Liquidity reserve: amount kept by the SPV to pay the various expenses of the securitization operation functioning or to cover a shortage of temporary funds in the structure (such as an irregularity in the flows, but not the defects).
• Manager establishment (or servicer) : firm charged to manage the payment of securitization claims. In general, it is the assignor himself. Sometimes, a firm (also called Backup Servicer) promises to recover the claims in case of default from the manager establishment.
• Originator: firm which has been at the origin of the creation of claims or assets (the original borrower in case of claims).
• Priority stock (or Senior): stock (share or bond) which payment is priority over the other payments (Subordinated debt, management expenses, commissions) made by the SPV. Because of their nature, priority stocks have the lowest risk of outstanding.
• Pooling operation: enables to gather within one securitization organism of financial assets from various categories linked to the same activity.
• Repackaging: is an operation of securitization that enables the issue of real estates values that are directly related to the value of a financial subjacent.
• Subordinated stocks: stock (share or bond) which payment is subjected to the payment of stocks of the upper class. Therefore, the subjected stocks will be the first to undergo the non-payment of the claims. Often, the more subjected stocks are bought out by the assignor himself so that he can take charge of the first risk of non-payment of his claims.
• Synthetic securitization: a securitization operation within which the asset is still the property of the assignor, and only the risks or the flows generated by the said assets are taken by the securitization entity.
• SPV or SPC: Special Purpose Vehicle or Special Purpose Company, generic name of financing vehicles created to acquire the claims of the assignor and usually to issue stocks on the market. This intermediary entity
between the assignor and the investors is also a guarantee of the good ending of the operation of securitization in case of default from the assignor.
• Trust company: firm which generates the operation of securitization as well as its accounting until the time of its termination. It is mostly used in juridical systems that use the form of Debt securitisation fund.
• Securitization mortgage claim: stock issued by a securitization structure related to one or many mortgage claims, negotiable on financial markets.
• Trustee: firm in charge of preservation of the proofs of securitization claims (identity of the claims, slips of transfers…).
• Vehicle of refinancing: intermediary that we sometimes invest (including in France) between the SPV and the investors. The refinancing vehicle promises to buy out stocks to sell them back under another aspect ( commercial papers, for example) in order to modify the periodicity of stocks payment and their nature. This makes the new stocks more accessible for the investors.