Securitisation should be used to quarantine any asset from litigious or court related activity which may have an adverse or detrimental impact on a business’s (or a person’s) legal and/or financial position.

Securitisation, by definition,  is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming that/those asset(s) into a security.  A typical example of securitisation is a mortgage-backed security (MBS), which is a type of asset-backed security that is secured by a collection of mortgages.

Securitisation can also be defined as the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, business debt, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling/transferring/assigning  their related cash flows and/or equity to an unrelated third party as a security for a transparent commercial business transaction [the contractual debt may be described as bonds, pass-through securities, or collateralised debt obligations (CDOs)].

Stakeholders are repaid from the principal and interest cash flows collected from the underlying debt and redistributed through the capital structure of the new financing; and capital equity can be repatriated through the sale of a security, or through an appropriate structure which secures the Stakeholder’s position with a defined beneficial interest structural . Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS).

Like investment or business transaction, the higher the risk, the higher potential rate of return. Even though the securities are back by tangible assets, there is no guarantee that the assets will maintain their value should a debtor cease making payments and/or in the event of asset realisation!

Securitisation takes many different forms, some of which are:

Securitisation of Personal Assets

Securitisation of Residential Equity

Securitisation of Property Equity

Securitisation of Super Funds

Securitisation of Business Assets

Plant & Equipment

Intellectual Property

Business Ownership

Business Debtors

Real Property

Defined Beneficial Interest