Securitization

In the last decade, a great a variety of financial instruments have been developed that allow diverse agents of economy to obtain funds at lower costs. One of those mechanisms is the securitization of company assets. The idea behind these schemes is to achieve the conversion of non liquid assets (non susceptible of negotiation) into current assets (convert the future cash flows to current values), allowing this way its free application to the real needs of the companies. The most renowned doctrine, denominates this process as the “asset metamorphosis” (Steven L. Schwarcz).

The securitization of assets mainly involves the issuance of guaranteed securities, or secured in any manner, by a mass of financial assets duly grouped in a pool of assets and in some cases the intermediation of other banking guarantees, such as bonds or stand-by letters of credit. Such assets must be transferred to a “special purpose vehicle” which would then issue the corresponding securities. These assets may include among other, mortgage loans, vehicle loans, credits deriving from credit cards and any other commercial invoice from which a credit or a right derives and generates a periodic cash flow. In general, holders of issued securities acquire the securities not really for the safety that the issuer offers them, but for the nature of the financial assets that support the operation. The source of payment of the referred securities would be determined by the cash flow that the accounts receivables or rights that form the pool of assets generate.

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