Chapter 6

Transaction Templates and Checklists

This chapter includes a series of example templates, checklists, and pro forma to illustrate the process of structuring a typical loans asset-backed security (ABS) or collateralized loan obligation (CLO) transaction. The examples shown are live working documents and worksheets, and so should be applicable to most deals. The intention is that they are of value to practitioners looking to close an ABS, particularly first-time originators.

The exhibits presented here are specific to the Red Sea Corporate Loans ABS transaction closed by Europe Arab Bank (EAB) in 2009. This was an in-house securitization that was arranged to generate collateral for use at the European Central Bank, and all the issued liabilities were bought by the originator. However, as a transaction it illustrated every aspect of the work of a conventional externally placed ABS or CLO, from the rating process to the legal review and engagement of third-party suppliers. The forms can be considered generic for any cash flow ABS transaction, and are applicable to any financial institution. We recommend them to first-time originators contemplating closing their first ABS deal.

Red Sea Master Series Limited Structure Diagram

Exhibit 6.1 shows the final transaction structure diagram, including the SPV structure and tranched liabilities. As a transaction, Red Sea was unusual in that it had a multi-SPV set up. This was to enable the multicurrency nature of it to be handled better ...

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