1 ASF 2006 Securitization 101 Sunday, January 29, :30 p.m. to 1:30 p.m. Speaker: Richard Simonds Partner, Thacher Proffitt & Wood LLP

2 What is Securitization? Use a bankruptcy-remote SPE to isolate assets Issue structured securities based on cash flow from these assets

3 What are Structured Securities? Structured securities are non-recourse debt securities backed by financial assets such as mortgage loans and credit card receivables

4 Kinds of Structured Securities MBS: RMBS and CMBS ABS CDOs: mostly CBOs and CLOs ABCP

5 Basic Structures Cash Flow Structures Market Value Structures Revolving and Non-Revolving

6 Reasons for Securitization Sell assets more efficiently off-balance sheet Finance assets on- or off-balance sheet In each case, assets are isolated from credit of the sponsor through a “true sale” of the assets

7 Securitization Parties Sponsor Servicers Trustee Rating Agencies Credit Support Providers

8 Transaction Documents Pooling and Servicing Agreement Purchase Agreement Officer’s Certificates Opinions

9 Legal Issues True sale Perfected security interest Non-consolidation

10 Accounting Issues On-balance sheet treatment Off-balance sheet treatment FAS 140 and FIN 46

11 Ratings Evaluating risk and determining levels Credit support structures

12 Securities Offering Reform Finalizing terms early Regulation AB Enhanced disclosure requirements

13 Conclusion Bankruptcy remoteness Diversification Attractive securities for investors