1. Securitisation: An efficient alternative funding tool
Insert your presentation title here
29 October 2004
DACT
Securitisation: An efficient alternative funding tool
Maurice Jongmans
Rabobank International
Corporate Origination and Structuring

2. Insert your presentation title here
Definition
Illiquid pools of assets which are packaged, ring-fenced, underwritten and distributed in the form of liquid Asset Backed Securities.
The cash flows of the underlying assets are the prime source for the payment of interest and principal of the Asset Backed Securities.

3. “After the 2008 Credit Crisis, Securitisation has no raison d'être”
…Bold statement?
“After the 2008 Credit Crisis, Securitisation has no raison d'être”

4. Issuance Trends – Term Securitisation
Securitisation still holding strong although at a somewhat lower level
Issue size per year in EUR billion
YTD 2011 by Asset Class
YTD 2011 by Country
Source: DB, Bloomberg

5. “Securitisation is less efficient”
…then perhaps?
“Securitisation is less efficient”

6. Pricing of term securitisation first half 2007 versus 2011
Credit Margin of an AAA-bond; being the most senior position of the transaction
Nov
Residential Mortgages Backed Securities bps 11 bps
Commercial Mortgage Backed Securities bps 18 bps
Auto Loans bps 45 bps
Collateralised Loan Obligations bps 25 bps

7. For corporate securitisation, let’s turn to ABCP-market
The so-called Asset-Backed Commercial Paper (ABCP) Market in short:
Commercial Paper with a tenor less than 360 days
Frequent issuance by bank sponsored ABCP conduit
Size: Currently around USD 380 billion
Short-term ratings A-1 / P-1 (consistent with a long term A / A2 rating)
Backed by assets and cash flows
Matches short-term, variable and/or smaller portfolio’s of receivables

8. ABCP Conduit Securitisation: an overview
Key Considerations
Transaction Size
Usually starts with EUR 40 million
Asset Type
Assets suitable: trade receivables, lease portfolios, auto loans, consumer loans and film rights
Rating
Transaction structured to short term A-1 / P-1 ratings
Advance Rate
Typically 85% - 90% of eligible receivables
Flexibility
New subsidiaries, new jurisdictions can be added post closing
Accommodates multiple currencies
Allows for fluctuating pool sizes and seasonality
Time Frame
2-3 months to closing and funding from mandate and complete data set

9. ABCP – market: very liquid market for client driven deals
Total Outstanding in USD billions
from January 2001-October 2011
Source: FED, Rabobank

10. ABCP – market: and efficient!
As example Rabobank’s own client conduit Nieuw Amsterdam
Cost of Funds (1 year) vs. 1, 3 months US LIBOR
Cost of Funds (1 year) vs. 1, 3 months EURIBOR
Average 1 year US LIBOR and CP rate
Average 1 year EURIBOR and CP rate
1 month LIBOR
0.23%
+/+ 9bps
3 month LIBOR
0.29%
-/- 0bps
EUR CP Rate
1 month EURIBOR
1.07%
-/- 20bps
3 month EURIBOR
1.27%
-/- 41bps
EUR CP Rate
0.86%

11. ABCP-securitisation structure
Typical Conduit Securitisation Structure
Basic Concept
From the Corporates perspective
Legal: True Sale
Risk Transfer: Non Recourse
Accounting: On Balance Sheet (Standard)
Account Debtors
Trustee
Liquidity Facility
Receivables
Sales
Corporate
Sale of Receivables
SPV
(Purchaser)
Nieuw Amsterdam
CP Proceeds
ABCP Investors
Ownership Interest
Proceeds
Limited Recourse Loan Facility
CP Notes rates A-1/P-1

12. ABCP-securitisation: Basic Concept
Usually a revolving sale of assets to an SPV per month, bi-weekly, weekly or daily
Ideally, portfolios are highly diversified but larger concentrations can usually be accommodated
Risks of the portfolio are substantially transferred, although the Borrower holds a first loss position in the portfolio
Investors look to the assets for repayment, not to the Borrower, and are protected from the applicable credit enhancement
No change to the Borrower’s credit and collection policies or cash management procedures
Corporate remains servicing portfolio
Going concern no notification to debtors of the sale of receivables

13. ABCP-securitisation structure: Funding Side
Liquidity Facility:
Sponsored by banks
To support liquidity of the ABCP paper
Liquidity Facility
Account Debtors
Trustee
Receivables
Sales
Sale of Receivables
ABCP Investors
Corporate
SPV
(Purchaser)
Nieuw Amsterdam
Proceeds
CP Notes rates A-1/P-1
Proceeds
ABCP Investors
Institutional Investors
Name of corporate unknown to investors

14. ABCP-securitisation structure: Corporate Side
Insert your presentation title here
ABCP-securitisation structure: Corporate Side
Securitisation structure
Account Debtors
Trustee
Liquidity Facility
Sale of Receivables
Corporate
SPV
(Purchaser)
Nieuw Amsterdam
CP Proceeds
ABCP Investors
Proceeds
CP Notes rates A-1/P-1
Relation between Corporate and SPV
Receives purchase price (on average 85-90% of the total receivables portfolio)
Purchase price is determined based upon historic performance; defaults, write offs, dilution, DSO
After collection of 100% of outstanding receivables, the remaining % after interest deduction and cost will flow back to the company

15. Factoring vs. Securitisation
Program Limit
Differs, usually a max. of EUR 150 mln
From EUR 40 mln, transactions in excess of EUR 1 bn not uncommon
Commitment
If debtors are offered
1-year commitment, but 2-or 3 year facilities possible
Debtors
Cherry picking – in most cases ‘household names’
The portfolio approach
Funding
Bank Funding
Funding in Capital Market
Advance Rate
Static
Dynamic
Number of Countries
One country per facility
One or more countries
Insurance
Credit insurance usually is required
Normally no credit insurance needed

16. ABCP-securitisation: Benefits & Disadvantages
Non-rated companies can tap the international capital markets
New, incremental source of liquidity – diversification of funding
Term commitments are possible
Syndication can address wallet sizing concerns of other relationship banks
Potential off balance sheet solutions can be explored
Specific financial covenants typically not required but cross default to existing loan covenants
Disadvantages
Securitisation is not a product for all
for example: a smaller portfolio diversified over multiple countries can be costly
Advance rate depends on quality and availability of historical receivables performance data
Although it does fit well with other financing in many cases a carve out language may be necessary
Available assets for bi-lateral bank facilities reduces
Funding is also dependent on efficiency and liquidity of conduits lenders