Securitisation. A practical guide. 2-day workshop on. Organised by: Vinod Kothari Consultants P. Ltd. To register kindly drop a mail or call at:

Transcription

1 2-day workshop on Securitisation A practical guide Date: 16 th & 17 th Sept, 2016 Venue: The Lalit, Mumbai Organised by: Vinod Kothari Consultants P. Ltd To register kindly drop a mail or call at: vignesh@vinodkothari.com deepa@vinodkothari.com fintrain@vinodkothari.com / /

2 Why this workshop? The Indian securitization market, which was lying low for several years primarily due to tax issues, has got a massive boost this year, with the removal of distribution tax effective 1st June Additionally, the CBDT has granted exemption from the requirement of deducting tax at source for payments made to a special purpose vehicle. There is already a proposal from the RBI and SEBI both to permit foreign portfolio investors to invest in securitized instruments. All these changes mean very positive outlook for securitization markets in India. Securitisation is one of the predominant means by which NBFCs extend their on-balance sheet leverage. It has also been used as a way by which financial inclusion is extended, by originators of priority sector assets selling their PSL qualifying portfolios. Advent of Basel III means a strain on banks in terms of their capital requirements. Securitisation is seen as an effective way of managing capital requirements, as the economic risk of securitized portfolios gets limited to the risk retained by the originator. Though significant progress has been made in reconfiguring Securitisation markets in the aftermath of the global financial crisis, the task of ensuring that these markets contribute to economic growth and financial stability is unfinished. To parcel out high quality cash flows and share the spoils of good cash flows, foundation of every securitisation transaction lies in the effective shaping of the models. Concepts of securitisation can be better understood with numbers running before you. Numbers provides clarity in seeing the structure of the transaction shaping up. At most basic levels cash flow will determine feasibility of the transaction and at complex levels numerous parties would rely upon cash flow modeling to ascertain different aspect of the transaction. Thus, cash -flow modeling is crucial to structuring of any securitisation transaction. These 2 days of the workshop will be focused on the practical aspects of securitisation, right to the core and excel modeling will be understood in the best possible way, using practical illustrations. We will understand how numbers provide clarity to the concepts of securitisation, delve into case studies to understand various asset classes, typicality in structures and more. If you have anything to do with securitisation, covered bonds or asset-backed funding, and getting inputs on this very important financial instrument, you would find it extremely sensible to be a part of this event. As the coverage is very comprehensive, you will emerge with complete inputs on securitisation. We will help you in learning the modeling and structuring for securitisation.

3 Course Outline Day 1 Session 1: Introduction to Securitisation Securitisation: Concepts, motivators, market Overview of the securitisation market: India and world-over Asset classes and structures Waterfall and cash-flows in securitisation structures Introduction to synthetic securitisation Introduction to Covered Bonds Session 2: Asset finance structures Various asset classes Typical risks in asset finance business Case Study of Auto Loan transaction Plain vanilla equipment lease deal: typical features Session 3: Legal, taxation and accounting aspects of securitisation Principal legal structure and legal issues in securitisation Taxation issues in securitisation and latest developments o In the originator s hand o On the SPVs o In the hands of the investors Accounting for securitisation- For originator, SPV and investor Stamp duty on securitisation Session 4: Regulatory aspects of securitisation RBI Guidelines on securitization Direct assignments and securitization key differences and economics of both Bankruptcy Code and its implications on securitisation Legal transfer and regulatory issues Risks and responsibilities in securitisation

4 Day 2 Session 1: Basics of securitisation modeling Waterfall of the transaction o Sequential pay-down o Proportionate pay-down Pass-through/ Pay-through structures Determining probability of default Determining classes of investments and ratings Impact of correlation Use of simulation Session 2: Understanding structures retail transactions: Introduction to RMBS structures; US RMBS market - agency and non-agency issuance; Case study: A US private label RMBS Key elements in CMBS transactions Comparative between RMBS and CMBS transactions Session 3: Stressing testing, NPA treatment etc: Accounting for securitization transactions in India Profit recognition in case of securitization/direct assignments Provisioning and NPA recognition in case of securitization and direct assignments Stress-testing of securitization and direct assignments

5 About the trainer Mr. Vinod Kothari Qualification: Company Secretary, Chartered Accountant About Mr. Vinod Kothari Vinod Kothari is internationally recognized as an author, trainer and consultant on specialized financial subjects, viz., securitisation, credit derivatives, accounting for financial instruments, structured finance, banking regulations, housing finance, etc. As such, he lectures all over the world. The locations where he has lectured on these subjects include New York, Washington, London, Milan, Frankfurt, Singapore, Hong Kong, Sydney, Colombia (South America), South Africa, Malaysia, Jordan, Dubai, Kuwait, Egypt, Sri Lanka, Bangladesh, etc. Mr. Kothari with his efficient team has handled very diverse groups - from rating agency professionals in Malaysia, to group of investors in Sydney, to tax officers in South Africa, to group of lawyers in India, to executives of the World's largest securitisation agency in Washington, to a group of quants in New York. Vinod Kothari through his firm Vinod Kothari and Company is also engaged in practice of corporate laws for over 25 years. Consulting & Training Securitisation/ Credit Derivatives/ Credit Risk: Vinod Kothari is an accomplished trainer on structured finance and offers about 20 training courses every year on credit risk, securitisation and credit derivatives all over the World. The locations VK has offered seminars/ workshops on advanced topics in finance include New York, Washington DC, London, Milan, Frankfurt, Luxembourg, Sydney, Singapore, Hong Kong, Kuala Lumpur, Johannesburg, Mumbai, Delhi, Kolkata, Shnaghai, Shenzhen, Colombo, Colombia (South America), Dubai, Kuwait, Dhaka, Zambia, Jordan, Egypt, Indonesia, Nigeria, etc. See for VK's forthcoming training courses, and some courses completed in the past.

6 Credit Derivatives: Closely affiliated to securitisation, credit derivatives is another area of our expertise. Vinod owns and runs a website on credit derivatives. Vinod Kothari also offers training on credit derivatives. Accounting for Financial Instruments: Complicated accounting standards on financial instruments - IAS 30, IAS 39, IFRS 7, IFRS 9, fair value computation hierarchy, etc., require combination of deep understanding of financial instruments and derivatives, and accounting standards. VK easily combines these two, given accounting qualification and in-depth understanding of finance. Basel II, Basel III, ICAAP, Risk Management: Basel II has brought to fore what was anyway utmost requirement for the banking system. VK offers comprehensive consulting and execution services, and of course, training in each of these fields. Housing Finance: Vinod Kothari Consultants has been awarded a prestigious IFC contract for preparation and dissemination of a toolkit for housing finance. As such, VKC will be carrying out a series of training workshops on housing finance. In the past, VK carried out trainings on housing finance in alliance with IMACS. VK has provided expert advice to regulators and law-makers World-over. For example, the South African Revenue Service consulted VK for framing guidelines on taxation of securitization. The Sri Lankan securities regulator has sought VK's advice on a draft of securitization legislation. India's securities regulator has sought VK's assistance and expert advice in framing securitization regulations in the country. VK has undertaken a major consulting assignment to advise the Government of Jordan on financing of affordable housing Leasing: Leasing and non-banking financial services have been our consulting area for last 15 years. VK is unquestionably India's top leasing expert. Besides some of the top names in Indian leasing including banks and financial corporations, we have leasing clients in Bangladesh, Sri Lanka, Zambia, Jordan, etc. Corporate laws: Vinod Kothari's firm, Vinod Kothari and Company, is engaged in practice as company secretaries, a field of practice in corporate laws, for over 25 years.

7 Other Important Engagements: Has been retained by the Asian Development Bank, Manila for two important projects: to advise the Govt. of India on reforming secured lending law in India; and to develop securitisation-related legal framework in the Asian region. He is the Director of Indian Securitisation Foundation, a representative body of the securitisation industry in India promoting capital market instruments in India Claims extensive consulting experience in securitisation - offering comprehensive securitisation-related consulting services to a variety of clients including originators, investors, IT companies, etc. Apart from one-off services to several companies in different countries. For several years now, Vinod Kothari has been a part of World Bank's Doing Business in India team. Vinod Kothari Consultants (VKCPL) has been engaged by ADB for a project on capital market instruments for housing finance in India. VKCPL has also prepared a toolkit for IFC, Washington titled "India Toolkit for Low Income Housing Finance - A Practitioner's Guide", in collaboration with Habitat for Humanity. He was sub-consultant to "Affordable Housing Finance Project" of IFC, awarded to IMaCS. Has been retained by National Housing Bank for assisting them in promoting Covered Bonds in India. Was a part of Working Committee formulated by National Housing Bank for promoting capital market instruments such as RMBS and Covered Bonds for the housing sector in India. Has been retained by Govt. of Jordan for suggesting and working on funding for a highprofile low-cost housing project. Is the Director of Association of Leasing and Financial Services Cos., a body of over 500 top leasing companies in India. Author of Books: Guide to Structured Finance, Academy of Financial Service P. Ltd., 2014 Securitisation, Asset Reconstruction and Enforcement of Security Interests, Butterworths Lexix Nexis, 2013 Fourth Edition Introduction to Securitisation by Frank J. Fabozzi and Vinod Kothari, Wiley, July Securitisation: The Financial Instrument of the Future, Wiley, Fifth edition Leads a team of special editors for A Ramaiya's Company Law, 18th edition. This is

8 admittedly the most authentic commentary on Companies Act in India, now revised for the Companies Act Guide to Independent Directors, Taxmann, 2014 [Jointly with Sikha Bansal] Understanding Companies Act, 2013, Taxmann,2014 Corporate Boards, Committees and Policies under Companies Act, an ICSI publication Taxation of Lease Transactions in India, Academy of Financial Services, 2013 [Jointly with Sikha Bansal]. Author of Highlights and quick referencer and tables in "Corporate Laws" second edition, published by Lexis Nexis. Guide to Housing Finance: A Comprehensive Guide to Mortgage Lending, Academy of Financial Services, Credit Derivatives and Structured Credit Trading, Wiley, 2009 edition. Lease Financing and Hire purchase (4th edition, 1996). Author of 3 Chapters in Handbook of Finance, (editor Frank Fabozzi), published by Wiley, USA. Lecturing: Regular speaker at professional institutes. Visiting faculty at Indian Institute of Management, Joka, Calcutta for several years, teaching a fully fledged course for the final year students on Structured Finance and Taxation. Over 125 students sign up of the course every year. Guest faculty at the National University of Juridical Sciences- the subject taught here are insolvency and credit interest enforcement laws in India and other countries. The course included a comparative study of the insolvency and creditors' rights in USA, UK and Australia. Articles: Vinod Kothari's articles on asset-based finance, securitisation etc. have appeared in several national and international journals including Duke Journal of Comparative International Law (USA), US Banker (USA), Exportrader (Spain), Trade and Forfaiting Review (UK), Journal of International Banking Law and Regulation (UK), Equipment Finance Journal (USA), Monitordaily (USA), Analyst (India), etc. Vinod Kothari also contributes to Euromoney's yearbooks on leasing and securitisation.