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Introduction to Securitization by VINOD KOTHARI, FRANK J. FABOZZI

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WHOLE BUSINESS OR OPERATING REVENUES SECURITIZATION

The idea of whole business securitization developed in the United Kingdom during the mid-1990s when the cash flow of a nursing home were securitized. This led to a spate of transactions in various spheres such as pubs, hospitals, entertainment and amusement sites, airports, theaters and ferry services. The market for whole business securitization is still largely limited to Europe, and there too, with a concentration in the United Kingdom.
The devise of whole business securitization (also known as corporate securitization, corporate entity securitization, operating revenues securitization, or hybrid finance) sprang basically from the leveraged buyout (LBO) market and the crux of a whole business securitization is the securitization of an LBO. Whole business securitization captures the residual value of a business (i.e., the valuation of the business) and creates securities that represent this residual value.
Given the ability to apply this device to the cash flow of almost any business, the concept virtually breaks down all limitations of securitization and extends it to almost any business that satisfies certain features.
Objectively, there is not much difference between a plain secured borrowing and whole business securitization. In a plain borrowing, the borrower obliges itself to pay to the lender, and the obvious source of payment is the cash flow of the borrower. The lender might have security interest in all or some ...

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