UK Law and Practice Contributed by: Guy O’Keefe, Richard Jones, Oliver Wicker and Kate Patane, Slaughter and May
Slaughter and May One Bunhill Row London EC1Y 8YY United Kingdom
Tel: +44 (0)20 7090 4549 Fax: +44 (0)20 7090 5000 Email: kate.patane@slaughterandmay.com Web: www.slaughterandmay.com
1. Specific Financial Asset Types 1.1 Common Financial Assets Common asset classes securitised in the UK include: • residential and commercial mortgages; • credit cards; • personal loans and auto loans; • commercial/trade receivables; and • corporate loan portfolios. Other less common asset classes that have been securitised in the UK include: • lease and rental receivables; • IP royalty receivables; • insurance premiums; • healthcare receivables; • ticket receivables; • receivables from public utilities; • mobile handset loan receivables; and • student loan receivables. 1.2 Structures Relating to Financial Assets The transactional structures used in securitisa - tions are designed to isolate financial assets,
transfer risk and create securities that can be sold to investors. • Residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) often use a special pur - pose entity (SPE) to hold the mortgage loans, which are then used to back the issued securities. The cash flows from the mortgage payments (interest and principal) are passed through to investors in prescribed amounts after administrative costs and fees are cov - ered. • Asset-backed securities (ABS) involving con - sumer debt are similar to RMBS and CMBS, and also use an SPE structure. Credit card receivables, auto loans and personal loans are transferred to the SPE, which then issues notes to investors. • Collateralised loan obligations (CLOs) involve pooling commercial loans and are organised by a manager, who selects and actively man - ages the corporate debt. They differ from other structures as they are managed over their life, with the potential for trading and substitution within the portfolio. The CLO issues tranches of debt with varying seniority and risk profiles to investors.
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