Workshop on Securitization held at FMS

The workshop was conducted by Mr.Vinod Kothari, an internationally acclaimed trainer and expert on Securitization, Asset-based finance, Credit derivatives, and author of many books on the same. He guided the students through the basis of Securitization with simple illustrations. He explained in detail how the companies satisfy their liquidity needs by creating a Special Purpose Vehicle (SPV) and transferring their receivables into it. Against these receivables, the SPV issues bonds/stocks which in turn are subscribed to, by different classes of investors. The risk-return trade-off for each category of investors in such a structure varies.

The function of the SPV in a Securitization transaction could stretch from being a pure conduit or intermediary vehicle, to a more active role in reinvesting or reshaping the cash flows arising from the assets transferred to it, which is something that would depend on the end objectives of the Securitization exercise.

Mr. Kothari further drew a link between the securitization process and US Sub-prime market crash. Then he talked about the implications of the same and involved students in a question answer session. According to the students who attended the session, the speaker touched upon various aspects that were not covered in most of the text books. Securitization is a burning topic and needs lot of understanding (As in the TATA-Corus Deal that was partly financed using this model and the sub-prime market crash that is related to this.) Overall, it was a good learning experience for the wannabe I-Bankers at FMS.