Securitisation is a sophisticated structured finance transaction. This involves the pooling of any type of asset in a special purpose securitisation entity, and selling its related cash flows to investors as securities.
Typically, the securities issued against cash consideration are debt instruments, which may be structured in any appropriate way. This could be through interest bearing or zero-coupon, fixed or floating rate interest or performance-linked, convertible into shares of the securitisation vehicle, or exchangeable against the underlying asset.
However, the law also allows the securitisation vehicle to issue shares. The securities are issued in order to finance the acquisition of the asset, and so the asset is thereby truly sold by its original owner – the Originator – to the securitisation vehicle.
Securitisation may also be used for the assumption of risk from the Originator (synthetic securitisation) or be tied to a secured loan to the Originator (loan securitisation). Furthermore, our licensed Maltese group trustee may serve as a securities trustee where appropriate.
Therefore, securitisation is the conversion of virtually any type of asset or assumption of risk or debt into securities, which can be placed and traded in capital markets.