Accounts Receivable Securitization

Boothorbust

TraderDailyI just read over M&I's info above online and it is pretty good! Interesting area.

For anyone not interested / interested in this arena, could you elaborate on the pros and cons?

The only cons I found is that the exit opps wouldn't be a long/short equity fund or global macro hedge fund, but a fund that invests in structured notes. But other than that it sounds like a good idea to go into.

You could take even revenues from something like movies or solar power and turn them into ABS's. Sounds like you can add significant value.

The future of securitization is a little bit uncertain right now for a few reasons: 1) Banks selling securitizations will be required to maintain 5% of the credit risk, the so called "Skin in the Game" rule from Dodd-Frank. This makes securitization much more expensive from a risk and capital standpoint for big banks to do 2) Bank exposures to securiziations will be subject to much higher capital requirements going forward, making the secondary market more expensive to participate in, possibly (probably) decreasing issuance.

Basically regulation is and will be putting a lot of pressure on these transaction types, which is not to say they won't be done (they are still a very attractive form of financing for many firms), but they won't be as big as they were.

To your other point, yeah theoretically you could securitize any receivable, but there's unlikely to be a market in things like movie receipts. The best assets to securitize are those with predictable cash flows (auto loans, mortgages(woops!), other accounts financial receivables).

Thanks so much for this insight. I obviously need to review the Dodd Frank Act in detail.

In any event, I am interviewing for jobs in Instititutional Sales. The last bank I spoke with and am waiting to hear back from is scaling back on their fixed income (I'm guessing perhaps structured finance). So it seems that fate is moving me towards my initial impulse with everyone I speak with - Equity Sales (small, mid-cap).