Glossary of Terms

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Asset Securitization

A securitization is the aggregation of large pools of financial assets, such as aircraft leases, credit card receivables, equipment leases, student and other loans which serve as collateral for securities issued by a special purpose entity. The investors (which could include the public) purchase an interest in the pool in the form of bonds which are typically rated by one or more rating agencies. The bonds represent debt obligations of the issuer. They are secured or "collateralized" by the pool of assets. Because the issuer is almost always a special purpose entity with no other source of payment, the cash flow from the pool of assets usually provides the only means to repay the bonds. (Courtesy www.elfaonline.org)

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