Securitisation is a financing tool whereby a pool of assets belonging to a company is legally isolated, or "ring fenced", from the company and financed separately through the capital markets. The company's recourse is usually limited to the cashflow from the securitised assets.
Asset backed securities
Many securitisation transactions are funded through Asset-Backed Commercial Paper conduits, which are bank-sponsored special-purpose financing companies. Danske Bank is the largest Nordic sponsor of such a company. Our ABCP conduit, Polonius Inc., which was established in 2000, has securitised more than $1.8 billion of assets to date.
Companies that require longer-term financing look to access the bond markets through securitisation and typically securitise longer-term assets such as mortgages. Danske Bank is also well placed to assist clients wishing to utilise the asset-backed bond market.
Customisation and convenience
When we arrange a securitisation transaction, our objective is to create an easy-to-manage securitisation structure that fits your company's particular circumstances. We provide full support services not only during the initial structuring and execution phases but also throughout the term of the securitisation.
Key advantages of securitisation
- Access to the capital markets for funding without needing a strong credit rating
- Choice of a wide range of assets for securitisation, for example trade and credit card receivables, loans, leases and mortgages
- Diversification of funding sources
Financing on a "non-recourse" basis that does not affect bank lending lines
- Covenants linked to performance of the assets rather than the company's own financial performance
- Opportunity for high debt rating independent of the rating of the originating company, thus offering significant benefits for companies with no public rating
- Usually a lower funding cost than conventional corporate borrowing because of the high rating of the debt issued
- Possible improvement in key financial ratios and release of capital that can be employed more efficiently elsewhere