SULEMAN BAIG works with the credit structuring team at Deutsche Bank AG in London. He has extensive experience dealing with first-time issuers and has structured a number of securitization transactions (both agency and principal) in a variety of asset classes and jurisdictions. Suleman graduated with a degree in mathematics from the London School of Economics.

MOORAD CHOUDHRY is Treasurer, Corporate Banking Division at the Royal Bank of Scotland, and visiting professor in the Department of Mathematical Sciences, Brunel University. He is on the editorial board of the Journal of Structured Finance and a member of the editorial advisory board of American Securitization.

Foreword xi

Preface xv

Part One Introduction to Securitization 1

Chapter 1 Introduction to Securitization and Asset-Backed Securities 3

The Concept of Securitization 4

The Process of Securitization 7

Securitizing Mortgages 14

ABS Structures: A Primer on Performance Metrics and Test Measures 18

Securitization: Features of the 2007-2008 Financial Crisis 24

Summary and Conclusions 33

References 34

Chapter 2 The Securitization Market Post-2007 35

Market Observation 35

Impact on Rating Agencies 40

Summary and Conclusions 42

Part Two Guide to Closing a Securitization Transaction 45

Chapter 3 Structuring and Execution of a Transaction 47

A Securitization Process 47

Summary and Conclusions 69

Chapter 4 The Rating Agency Process and Legal Review 71

Select Rating Agencies 71

Undertaking Legal Due Diligence 73

Begin Drafting Documents 78

Set Up the SPV 82

Modeling the Transaction 85

Determine Capital Structure/Trigger Levels 90

Prepare Marketing Materials 96

Pricing, Close, and Settlement 98

Summary and Conclusions 99

Chapter 5 Static Synthetic CDO Cash Flow Waterfall Model 101

Summary and Conclusions 107

Part Three Transaction Closing Templates and Checklists 111

Chapter 6 Transaction Templates and Checklists 113

Red Sea Master Series Limited Structure Diagram 113

Underlying Asset Pool 113

Draft Term Sheet 120

Closing Process 126

Structuring Notes 127

Rating Agency Preparation and Questionnaire 129

Loan-Level Data: Rating Agency Checklist 138

Agenda for Rating Agency Site Visit 140

Legal Counsel Review 140

Form of Transfer Certificate 144

Investor and Rating Agency Presentation Template 147

In-House Credit Rating Mapping Chart: Lower and Upper Values 149

Rating Agency Presentation: Corporate Bank Origination Processes 149

Loan Transfer Schedule of Tasks 154

Loan Transfers, Accounting Movements 158

Sign-Off Document: Securitization Project 160

Securitization Testing: Finance Department 161

Accounting Process on Closing 166

EUR Junior Tranche Trade Ticket 167

Senior Tranche Trade Ticket 168

Internal Transfer Booking Process 169

Questions from Trustee, Paying Agent, and Services Provider 169

Summary and Conclusions 172

About the Authors 173

Index 175