Singhania and Company LLP, Advocates and Solicitors

Securitization and Structured Finance

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Structured finance is a broad term, which is used to describe a sector of finance to help transfer risk using complex legal and corporate entities. This risk transfer as applied to securitization of different financial assets has helped to open up new sources of financing to consumers.

Securitization is the method which participants of structured finance utilize to create the pools of asset which are used in the creation of the end product financial instruments. Today, securitization and structured finance are firmly established as important engines of corporate and financial sector growth and activity. This market continues to be increasingly global in nature, as more countries seek to take on the legislation that enables these transactions to take place.

Securitization is a structured finance process, which distributes risk by aggregating debt instruments in a pool, then issues new securities backed by the pool. The term "Securitization" is derived from the fact that the forms of financial instruments used to obtain funds from the investors are securities. Securitization is a financial technique that pools assets together and turns them into a tradeable security. Financial institutions and businesses of all kinds use securitization to directly realize the value of a cash-producing asset. Our securitization and structured finance practice provides clients with a full range of services in the structured finance and asset securitization area. We have represented underwriters, issuers, special purpose entities, and servicers in all the phases of public and private issuances of asset-backed and mortgage-backed securities. We have also represented lenders and borrowers in transactions where assets are segregated from the risk of a bankruptcy of the operating company that uses the assets. The numbers of such transactions have grown extremely in recent years as the structured finance and securitization industry has evolved into a substantial source of financing for several companies.

Our services in this area include:
  • Planning the structure of the transaction.
  • Analyzing the legal quality of financial assets proposed to be segregated or securitized.
  • Drafting and negotiating the various transactional documents.
  • Organizing the special purpose entities.
  • Dealing with rating agencies, underwriters, credit enhancers, and back-up servicers.
  • Issuing the necessary legal opinions on the true sale nature of the transaction, bankruptcy non-consolidation, tax treatment, SEC matters, FDIC matters, and enforceability of the documents.
  • Selling subordinated interests to investors.
  • Transferring and financing residual interests.
  • Licensing servicers.
  • Negotiating and documenting intercreditor arrangements among structured finance lenders or securitization parties and other sources of financing.

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