A fully fledged Security is a bankable, negotiable financial instrument based on monetary value.
A Security usually represents an ownership stake in a publicly-traded corporation, a creditor relationship with a governmental body or a corporation, or rights to ownership as represented by an option. Emit a Security and generate acceptable bankable Collateral.
A Security is a flexible, efficient and cost-effective method of raising capital. Under this structured finance, a pool of similar assets with predictable cash flows or future revenue claims is transferred from the ORIGINATOR to a special purpose vehicle, which finances the purchase price by issuing securities.
Securitization provides an optimal solution for converting liquid and illiquid assets into liquid cash flows by transferring the assets to investors in the form of securities.
Advantages for an Obligor
The debtor owes the originator payments for the underlying assets / assets which provides better financing conditions and a revaluation of creditworthiness (improved credit rating)
Advantages for an Originator
The originator is the one who transfers the assets and risks to the SPV in a securitization transaction which enables efficient access to the capital markets. Issuer-specific restrictions on raising capital are minimized, illiquid assets can be converted into liquid assets, funding sources, investor groups and transaction structure can be selected and diversified. Capital for additional assets can be raised
Advantages for an Investor
The investor purchases the securities issued by the SPV and is entitled to receive both repayment and interest based on the cash flows generated by the assets. This provides the possibility to combine returns, risks and maturities individually. A Security provides tailored investment sources, portfolio diversification, higher returns and lower volatility compared to direct investments