Q&As

What is a true sale in a securitisation context?

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Published on LexisPSL on 05/10/2016

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • What is a true sale in a securitisation context?
  • What is a securitisation?
  • What is a true sale?
  • How is a securitisation structured as a true sale arrangement?
  • Why is it important for a securitisation to be characterised as a true sale?
  • What are the implications if a securitisation is found not to be a true sale?

What is a true sale in a securitisation context?

What is a securitisation?

A securitisation is a financing technique used to finance the ownership or sale of types of assets that would otherwise be difficult to finance or sell (ie 'illiquid' assets such as bilateral loans and mortgages and other loans to natural persons). In its most common form, a securitisation consists in the sale of a large pool of such cash-generating assets to a special purpose vehicle (SPV). The SPV pays for the assets by issuing interest-bearing securities (also known as bonds or notes) into the capital markets, which have the benefit of security over those assets and/or the cashflows generated by them (known as receivables). The cashflows generated by the receivables are used to pay interest and repay principal on the securities, and investors can generally only look to the receivables for repayment.

For more information, see Practice Note: What is securitisation?

What is a true sale?

There is no statutory

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