The Complete CFO Handbook

Chapter 5. Structured Financing: Asset Securitization and Structured Notes

Agenda

Item 1	Explain what is meant by a structured financing.
Item 2	Identify the elements that generally characterize a structured finance transaction.
Item 3	Describe what is meant by asset securitization.
Item 4	Explain the reasons why a CFO will use a securitization rather than issuing a corporate bond.
Item 5	Explain the role of the special‐purpose vehicle in a securitization transaction.
Item 6	Describe the different forms of credit enhancement in a securitization transaction.
Item 7	Explain what a structured note is.
Item 8	Explain why derivatives are used in the creation of a structured note.
Item 9	Identify the benefts to the issuing corporation for creating a structured note.
Item 10	Describe the reasons why institutional investors are motivated to invest in structured notes.
Item 11	Explain the steps associated with the creation of a structured note.

As an alternative to the traditional sources of funds, including corporate bonds and equity issuance, a CFO can raise funds via a structured finance transaction. Structured finance consists of funding products and/or financing processes that are customized for the entity raising the capital in terms of cash flows, risk sharing, or other features.¹ Hence, to meet this requirement, existing products and techniques must be engineered into a tailor‐made product or process. Thus, structured finance is a flexible financial engineering tool.

A large part of what we consider structured ...