Introduction to Securitization by Frank J. Fabozzi

Author:Frank J. Fabozzi
Language: eng
Format: epub
Publisher: Wiley
Published: 2010-05-10T16:00:00+00:00

Restrictions on the Borrower’s Business

Being a quasi-lending type exposure, a future flow deal typically places restrictions on the borrower’s ability to borrow and create encumbrances or liens, and similar covenants.

No Originator Independence

While asset-backed transactions are structured so as to be independent of the originator (except to the extent of servicing), future flows deals are substantially, if not completely, dependent on the originator. Therefore, seldom have future flow deals been able to traverse the rating of the originator; their motive is not to arbitrage the originator rating but the sovereign rating, as discussed in the next section. Or, alternatively, the motive is to achieve a higher extent of funding than permitted by traditional methods.

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