Introduction to Securitization

PARTIES TO AN ABCP PROGRAM

The parties to an ABCP program include:

• A program sponsor

• An administrative agent

• A manager

• A placement agent

• An issuing and paying agent

Program Sponsor

The program sponsor is the one who originates the whole idea and refers assets to the conduit. Program sponsors are usually banks and financial intermediaries who use the conduits as extensions of the bank’s credit book to house specific assets with capital market funding.

It is not necessary for the conduit sponsor to own equity in the conduit. As SPVs are typically structured, the legal equity of the conduit is usually small and is owned by unaffiliated parties such as charitable trusts. However, the sponsor does have material interest in the conduit, mostly by way of credit enhancements. These credit enhancements allow the bank to reap much of the excess spreads earned by the conduit, so the prime beneficiary of the conduit is mostly the sponsor. This practice led the Financial Accounting Standard Board (FASB) to put in place a different method for recognizing the economic equity of the conduit (FIN 46R).

Administrative Agent

Just as most securitization transactions have servicers, there is an administrative agent to handle the regular administration of the conduit. The administrative agent may be the program sponsor or one of his affiliated entities because the control of day-to-day affairs of the conduits vests in the agent. The functions of the administrative agent extend to issuing, ...