ABS Issuer

From Open Risk Manual


ABS Issuer. The issuer of the (Cash) Asset Backed Security. This is generally a Special Purpose Vehicle set up by a corporation. Further details from riskglossary.com: To create an ABS, a corporation creates a special purpose vehicle to which it sells the assets. While is is common to speak of the corporation as the issuer of the ABS, legally, it is the trust or special purpose vehicle that is the issuer. It sells securities to investors. To protect investors from possible bankruptcy of the corporation, there are three legal safeguards: - Transfer of assets from the corporation is a non-recourse, true sale. - Investors receive a perfected interest in the assets' cash flows. - A non-consolidation legal opinion is obtained certifying that assets of the trust or special purpose vehicle cannot be consolidated with the corporation's assets in the event of bankruptcy. These same safeguards allow the corporation to remove the assets from its balance sheet. The corporation generally continues to service the assets - collecting interest and principal payments, pursuing delinquencies, etc. It is paid out of asset cash flows for providing these ongoing services.


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