The workshop was conducted by Mr Vinod Kothari, an acclaimed trainer and expert on securitization, asset-based finance and credit derivatives. He has also authored many books on finance. Says FMS, “Securitization is a burning topic and needs a lot of understanding. The TATA-Corus deal that was partly financed using this model and the sub-prime market crash are all related to this.”
During the workshop, Mr Kothari guided students through securitization with simple illustrations. He explained in detail how companies satisfy their liquidity needs by creating a Special Purpose Vehicle (SPV) and transfer their receivables into it. Against these receivables, the SPV issues bonds/stocks, which are, in turn, subscribed to by different classes of investors. The risk-return trade-off for each category of investors in such a structure varies.
The function of the SPV in a securitization transaction could stretch from being a pure conduit or intermediary vehicle, to playing a more active role in reinvesting or reshaping the cash flows arising from the assets transferred to it, which is something that would depend on the end objectives of the securitization exercise.
Mr. Kothari further drew a link between the securitization process and US sub-prime market crash, and talked about the implications of the same and involved students in a question answer session.
FMS says that it was a good learning experience for wannabe I-Bankers.
