Private offerings, on the other hand, may contain customized or unusual terms. 0000002822 00000 n The cash flows of the target group as a whole are then applied to repay the loans In addition, a securitisation in the UK may be structured as a secured loan – for example, in a whole business securitisation or a commercial real estate securitisation (CMBS). Whole business securitisation is evolving from an obscure and cumbersome funding technique for a select range of industries into a versatile corporate tool. At the end of July 2005 Marston's PLC (formerly The Wolverhampton & Dudley Breweries PLC) announced the marketing of a £805m securitisation of approximately 70% of its managed and tenanted estate. In whole business securitisation, the rating agencies look at the surety of the continuity of the business and therefore at the ownership of the locations or the rental contracts. That doesn t mean securitisation doesn t work full stop. Another issue is the nature of the asset pool to be securitized. startxref 0000000016 00000 n Overview. ... the structure … 0000002188 00000 n A whole business securitisation (WBS) may be likened to a securitised LBO – that is, it is the value of a business, reflected by the residual cashflows of the business, which is being securitised here. ServiceMaster proposes first-time $725 million whole-biz securitization The debut issue from its initial master-trust offering will repay a bridge loan taken out by Roark Capital for its October 2020 acquisition the commercial and residential restoration and cleaning franchisor. Whole business securitisation, and therefore pub securitisation, usually uses a secured loan structure whereby a loan is advanced by a special-purpose vehicle (the ‘issuer’) to a pubco, or ‘borrower’. That doesn t mean securitisation doesn t work full stop. Servpro was the strongest debut issuer in the growing whole business securitisation market in 2019, with strong investor demand helping lead bank Barclays push boundaries with the structure and pricing. In a default scenario, troublesome bank group dissenters are less likely to be prevalent as they will have been replaced by bondholders. Whole Business Securitization Introduction 1 Securitization vehicle, also called a special purpose vehicle, established only for the purpose of a specifi c securitization and legally diff erent and independent from the original owner of the assets. 0000003281 00000 n One of the latest innovations within the securitization field is whole business securitization. Securitization is a process by which illiquid assets, in the nature of cash flows and connected contract rights, are pooled and repackaged into marketable securities representing claims against the illiquid pool. Securitisation of a proportion of our managed and tenanted estate. %PDF-1.6 %���� Acted on the whole business securitisation of Odeon’s UK cinema operating business, acting for Odeon – the largest cinema operator in the UK ; Represented Annington Homes on the refinancing of its portfolio of Ministry of Defence housing. Whole business securitization is a transaction structure used in countries with creditor-friendly bankruptcy regimes more friendly than the United States's regime. trailer At a minimum, rating agencies require floating charges to be included in the security package for a “whole business” securitization. Industry fundamentals 9 2.1 Benefits of securitization 9 2.2 The process 10 2.3 Types of asset-backed securities 10 2.4 Risk and return profiles of tranche notes 11 2.5 The cash flow waterfall 12 2.6 True sale securitization 13 2.7 Synthetic securitization 14 2.8 Credit enhancement 16 The Securitization Process Prof. Ian Giddy Stern School of Business New York University Asset -Backed Securities The 6,900-strong chain, part of New York-listed Yum Brands, is the latest restaurant franchise to tempt investors with a so-called whole-business securitisation. In the United States, too much recourse back to the seller and too little default risk being transferred to the buyer may undermine the assets being considered as transferred to the buyer with there being no resulting “true sale.” Under English law, legal form is more generally respected. ). This type of securitisation uses a secured loan structure (as opposed to a true sale structure). These “whole business” securitization structures have particular relevance to international project finance transactions and demonstrate that, increasingly, the demarcation between securitization and project finance is being blurred. Peter is currently co-chairman of the accounting committee of the European Securitisation Forum. Please upgrade your browser to improve your experience. Whole business securitization, also called franchise royalty securitization, first appeared in 2006 and 2007, allowing franchise-based businesses to effect a complete makeover of their capital structure. 0000002344 00000 n As with other securities issues, asset-backed securities may take the form of an individual offering where all investors own, pro rata, incoming revenues from the securitized assets or a multi-tranche offering in which different classes or tranches of securities are issued carrying different rights to the asset pool. The £572 million refinancing of the deal was again launched as a conduit CMBS opco/propco structure… In a whole business securitisation, the companies involved in the securitisation often form part of a wider corporate group which includes members that are not involved in the securitisation. 0000038294 00000 n ). Other methods of asset transfer used in the UK in the context of securitizations include using participations and, increasingly, declarations of trust. Th e securitization vehicle has a diff erent governance structure than the originating fi rm. Currently, the penalty for non-compliance is a punitive capital charge against investors’ balance sheets. A secured creditor can appoint an administrative receiver and block the appointment of an administrator provided that the security package contains a floating charge over the whole or substantially the whole of the property, assets and undertaking, present and future of the applicable company. Securitization is a financial arrangement that consists of issuing securities that are backed by a pool of assets, in most cases debt. (This would not be the case if notice of the assignment were given to the debtor by the seller — a perfected “legal” assignment.) Another popular technique is for the seller to buy a junior tranche of marketable securities subordinate to the securities issued to the purchaser. The receivables invariably continue to be administered or collected by the originator with little real disturbance to existing collection procedures. If banks, their overheads and costing structures are “disintermediated” and finance is sourced directly from deep and liquid capital markets, competitive funding advantages arise for borrowers able to tap into such markets. Servpro was the strongest debut issuer in the growing whole business securitisation market in 2019, with strong investor demand helping lead bank Barclays push boundaries with the structure and pricing. In English “true sale” securitizations, for example, equitable assignments of assets are common under which written offers and oral acceptances typically effect a transfer so as to avoid local stamp duty. This enables the operating company to access a wider group of potential investors Whole-business securitization enables companies to issue bonds more cheaply . Th e decision to use whole-business securitiza-tion involves an explicit choice regarding the fi nancial structure concerned as well as mana-gerial involvement and control. Whole business securitization. Once isolated from the originator’s credit risk, such cash flows can be used to back securities issued in the capital markets — called “asset-backed securities” or “ABS” — having a higher rating than securities issued by the originator! With this growth has also come another feature: innovative securitization structures have been developed outside the United States, based on local legal concepts, that enable whole businesses rather than isolated receivables to be securitized. WHOLE BUSINESS SECURITISATION.As stated above,there is no fixed route for securitisation.For example,the UK is unique in that whole business securitisations are possible.Examples include RHM,The Really Useful Group and Welsh Water.With a whole business securitisation,the securitised assets remain the property of the The most common type of securitizations are receivables sales or “true sale” securitizations. Securitization is a capital markets tool that enables cash flows to be isolated from the credit risk of the originator. Five specific Credit enhancement is usually provided by the seller, rather than a third party, and usually through reserves of assets rather than direct recourse. Second, securitization can provide balance-sheet relief through the removal of securitized assets and corresponding funding liabilities from the balance sheet of the originator (thereby improving capital adequacy ratios in particular for financial institutions and reporting ratios, such as debt-to-equity ratios and return-on-assets ratios). Whole business securitisation after the fall The market impact of the sub-prime crisis has It is also becoming more familiar to regulators outside the United States. Compliance with applicable accounting rules is necessary if off-balance sheet treatment is required. ... the Group securitisation to provide stability and flexibility to the Group in order to manage the Secured Financing structure. Banks, after all, charge margins on their cost of funds that need to cover capital adequacy costs, return on shareholders’ equity, funding costs and profit margins. related. ritized. These “whole business” securitization structures have particular relevance to interna-tional project finance transactions and demon-strate that, increasingly, the demarcation between securitization and project finance is being blurred. The WBS transaction is structured based on the residual cashflows of an operating business. Certainly floating charge assets should not primarily be relied upon to generate funds to pay investors. The illiquid asset pool will also usually provide security for the debt service obligations of the marketable securities. This article aims to provide a brief history of the Punch Taverns group, a summary of its whole-business securitisation structures and to describe the events … Securitisation financing can also be raised via so-called “whole-business” securitisations in which a special purpose vehicle is established to lend, to the target group, funds raised via rated debt securities secured over the assets of the target group. For example, Standard & Poor’s focuses on four key concerns. In addition, first priority security interests must be granted over the assets of the operating company which should secure, in full, the principal and interest on the ABS. If the marketable securities are to be offered to the public, then terms and conventions commonly used in the market must apply, including the need for the securities to be rated. The introduction of securitization-friendly laws in markets such as Italy and France has caused corporates and regulators to embrace securitization to such an extent that it is no longer viewed in such markets with suspicion but rather as an important and necessary finance technique. Whatever structure is adopted for a particular securitization transaction, a range of issues must be considered in nearly all cases. The list of acronyms and abbreviations related to WBS - Whole Business Securitisation Most of the growth in ABS issuance is now taking place outside the United States where ABS issuance increased by 71.2% in 1999 over 1998 levels to $47.3 billion. UK Third, it is a method for widening a company’s sources of finance thus enhancing liquidity. The Barchester Healthcare assets first appeared in the securitization market as Westminster Healthcare Finance, an early whole-business transaction that was redeemed in 2006. 0000061272 00000 n He has been involved in and advised on a whole range of transactions from RMBS in prime and sub prime markets to whole business securitisations. The cash flows of the target group as a whole are applied to repay the loans to the issuer and to repay the rated securities to investors. 0 Such a technique allows to finance or refinance operating assets of the company. 811 0 obj <> endobj In 1999, global ABS issuance reached $198.8 billion (despite concerns about Y2K and interest rate hikes). An important example of this was the October 1999 issue by London City Airport of £100 million 7.886% senior secured notes due 2021 in order to finance its activities. 0000001895 00000 n Typical credit enhancement alternatives include injecting “extra” financial assets into the securitization — such as additional receivables — and using reserve accounts and credit wraps (such as insurance and letters of credit from third parties). Such transactions will increasingly be a feature of international securitizations, particularly in markets where creditor-friendly bankruptcy laws allow creditors, effectively via receivers, to assume control of underlying revenues on an on-going basis and manage the revenue pool of a business in order to extinguish capital markets indebtedness. But investors should be aware that deals aren t always legally watertight. Direct or third-party liquidity enhancement is common in the form of loans, the structure of which will be settled having regard to capital adequacy considerations of the lender. Where securities are to be rated, they are unlikely to be rated higher than the seller’s rating in the absence of substantial elimination of seller credit risk. Operating and financial covenants for a whole-business securitisation tend to be largely similar to those for leveraged loans. @��L��:1/:;�h��@�)��YO'.t���$�4ii��k�f'6��*̩2��Z��!���/��f�+r '&����*i��޴t�6��;�n�9p����y%��؂�l~�tz�ܩpl�V�Ng�ab9�1�����W�]���� 1G��D*���k�1/o�o����9ag�XH��jWP.�ŭ��k�—�m]�.ɯ�.�R,�xH��V�V9������|2�o���J��x`Ftt�C��444--�c``RRJ� ��P �(`qq �ѓ�0 As a result, in Europe, major infrastructure financings are now using securitization… Both were found to have big loopholes in the structure when they went wrong. 0000003203 00000 n Almost all securitizations require credit “enhancement” to cover the risk of underlying obligors in the pool defaulting. The 6,900-strong chain, part of New York-listed Yum Brands, is the latest restaurant franchise to tempt investors with a so-called whole-business securitisation. As the pool liquidates and pays out the lenders, the remaining reserves vest in the seller. X$D4H6. whole-business securitization requires extensive legal and rating-agency structuring. To date, the whole business securitization technique has been mainly used as an important refinancing tool — primarily for acquisition financings. ... securitisation structures, where it would be unusual for amounts to be rolled-up for such a long period without being paid out. Fourth, it enables assets to be matched with liabilities. As a result, in Europe, major infrastructure financings are now using securitization, in conjunction with project finance techniques, to enable projects to be financed. Whole business securitisation, and therefore pub securitisation, usually uses a secured loan structure whereby a loan is advanced by a special-purpose vehicle (the ‘issuer’) to a pubco, or ‘borrower’. The objective of this paper is to identify current problems and propose legal and regulatory reforms to Colombia's securitisation framework that would enhance e ... To reach that, an analysis of the securitisation legal structure in the UK and in Colombia is done, focusing in the underlying secured transactions. Our whole business securitisation comprises around £1.66 billion of debt as at October 2019 in the form of tradeable, listed bonds secured over the assets and cashflow of the majority of the business. In addition, a securitisation in the UK may be structured as a secured loan – for example, in a whole business securitisation or a commercial real estate securitisation (CMBS). Our whole business securitisation comprises around £1.66 billion of debt as at October 2019 in the form of tradeable, listed bonds secured over the assets and cashflow of the majority of the business. Standard & Poor’s says: “The balance of control in administration is weighted against the secured creditor. Its US$410m whole-business securitisation, called HONK 2015-1, is IFR’s North America Structured Finance Issue of the Year because it threw open the doors to lower-cost, repeatable funding that previously was reserved only for the nation’s biggest fast-food restaurants. Legal issues to be considered include compliance with securities laws and laws governing conduct of investment activities. He also has extensive experience of Master Trust Structures. Whole-business … Whole Business Securitization 1. For such originators — and London City Airport was one of them — the use of “whole business” securitizations is more appropriate. In terms of the “control” issue, under English law, a first ranking fixed charge will largely be unaffected by liquidation. A 20-year income stream may be financed by bonds having a 20-year term thereby avoiding risks of funding mismatches. In order to rate a whole business securitization, rating agencies have adopted an approach that combines elements of a structured or securitization transaction and a corporate transaction. Before describing the particular structures employed in operating-asset or whole-business securitization, it is perhaps worthwhile for me to explain the terminology “whole-business securitization” and … Punch Taverns' successful restructuring of £2.2bn of whole-business securitisation debt (2015) 2 JIBFL 107. The structure selected must be able to withstand the bankruptcy of the originator. First, it can be a cheaper and more flexible source of long-term financing, particularly for companies below investment grade. 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