Participants
Securitisation Participants
There are many parties involved in a securitisation transaction. Some of these are direct transaction participants. Others are parties providing services to the transaction parties.
Originator
The originator is the party that originated, and typically underwrote, the assets.
Seller
The seller is the party transferring/selling the assets to the SPV (typically the originator).
Servicer
The servicer is the party who administers and services the asset portfolio (often the originator of the assets).
Back-up servicer
The back-up servicer is the party who will administer and service the asset portfolio in the event that the servicer defaults, resigns or is removed as transaction servicer. Back-up servicing arrangements can be 'cold', 'warm', or 'hot'.
Special servicer
The special servicer is a specialised servicer who focuses on servicing and realising value from non-performing assets. In Australia, this function is typically performed as part of the general servicing agreement.
Issuing trustee
The issuing trustee is a transaction party in trust SPVs. The issuing trustee agrees to hold the assets of the trust on trust for certain named beneficiaries, pursuant to the terms of the trust deed. The collections received from the assets are applied in the manner set out in the trust deed; in particular, to pay priority expenses, investor payments and other payments. Investors are not beneficiaries of this issuing trust. They merely hold a promise made by the issuing trustee to pay the principal and interest.
Security trustee
The security trustee is the trustee of the security trust, which is a trust established to hold, for the benefit of investors and other secured creditors, a charge granted over the securitised assets.
SPV Manager/Administrator
The SPV Manager or Administrator is the party who manages the day-to-day administration and management of a securitisation program, including administering the securitised assets or overseeing their administration by others (the servicer).
Registrar
The registrar is the party who maintains the register of investors and their respective entitlements.
Paying agent
The Paying Agent is an agent of the issuer of debt securities who effects payments of principal and interest to investors.
Support provider
A support provider is a counterparty who provides credit, liquidity or cash flow support to a transaction. The facilities these counterparties provide help to transform the underlying asset cash flows into a smoothed cash flow stream to meet investor coupon payments, or enhance the credit quality of the underlying assets.
Lead manager/arranger
The Lead Manager or Arranger is the party who typically arranges the offering and manages the distributions and allocations of notes to investors. The lead manager may be assisted in that process by co-managers.
Underwriter
The Underwriter is a party who agrees to purchase any unsold securities at a predetermined price. Typically this will be the lead manager or other participating managers on the deal. Not all securitisation transactions are underwritten.
Dealer
A dealer is a financial instruments trader.
Other parties engaged in the securitisation process
In addition to the transaction parties, several other parties will be engaged in the process. These include law firms, accounting firms, rating agencies, and investors.
Law firms
Lawyers may be involved in several aspects of a securitisation. These include:
- Planning or structuring a transaction, particularly for new issuers, new asset classes or where there have been changes to relevant legislation;
- Drafting all of the documentation for a securitisation transaction; and
- Providing legal opinions to parties involved in a securitisation structure (in particular the rating agencies).
Accounting firms
Accountants may be involved in several aspects of a securitisation. These include:
- Planning accounting and tax structures;
- Planning how the structure will impact the originator;
- Providing formal advice on accounting and tax;
- Reviewing the financial models for the transactions;
- Undertaking due diligence of the asset pool;
- Providing audit and tax compliance;
- Providing consumer or rating compliance; and
- Providing outsourced services.
Rating agencies
Ratings are opinions as to relative risk of credit loss, expressed in terms of a ratings scale. Ratings provide investors with a way to benchmark credit risk within and across sectors and markets. Ratings help to increase the marketability of securities to investors.
Major rating agencies operating in Australia are Standard & Poor's, Moody's, and Fitch.
Investors
Investors are a critical consideration in the securitisation process, as securities need to be structured in a way that makes them attractive to investors to purchase at a price that makes the deal economic for the originator. Without investor demand for the securities on offer, the securitisation will not be successful.
All organisations who participate in the securitisation market are eligible and encouraged to undertake ASF corporate membership in support of their industry association.
