Securitization & Structured Finance

Structured finance is a broad term, which is used to describe a sector of finance to help transfer risk using complex legal and corporate entities. This risk transfer as applied to securitization of different financial assets has helped to open up new sources of financing to consumers.

Securitization is the method which participants of structured finance utilize to create the pools of asset which are used in the creation of the end product financial instruments. Today, securitization and structured finance are firmly established as important engines of corporate and financial sector growth and activity. This market continues to be increasingly global in nature, as more countries seek to take on the legislation that enables these transactions to take place.

Securitization is a structured finance process, which distributes risk by aggregating debt instruments in a pool, then issues new securities backed by the pool. The term “Securitization” is derived from the fact that the forms of financial instruments used to obtain funds from the investors are securities. Securitization is a financial technique that pools assets together and turns them into a tradeable security. Financial institutions and businesses of all kinds use securitization to directly realize the value of a cash-producing asset. Our securitization and structured finance practice provides clients with a full range of services in the structured finance and asset securitization area. We have represented underwriters, issuers, special purpose entities, and servicers in all the phases of public and private issuances of asset-backed and mortgage-backed securities. We have also represented lenders and borrowers in transactions where assets are segregated from the risk of a bankruptcy of the operating company that uses the assets. The numbers of such transactions have grown extremely in recent years as the structured finance and securitization industry has evolved into a substantial source of financing for several companies.

    Our services in this area include:

  • Planning the structure of the transaction.
  • Analyzing the legal quality of financial assets proposed to be segregated or securitized.
  • Drafting and negotiating the various transactional documents.
  • Organizing the special purpose entities.
  • Dealing with rating agencies, underwriters, credit enhancers, and back-up servicers.
  • Issuing the necessary legal opinions on the true sale nature of the transaction, bankruptcy non-consolidation, tax treatment, SEC matters, FDIC matters, and enforceability of the documents.
  • Selling subordinated interests to investors.
  • Transferring and financing residual interests.
  • Licensing servicers.
  • Negotiating and documenting intercreditor arrangements among structured finance lenders or securitization parties and other sources of financing.
    • The tax system in India mainly, is a three tier system which is based between the Central, State Governments and the local government organizations. India has a well-developed tax structure with clearly separated authority between Central and State Governments and local bodies. Central Government levies taxes on income, customs duties, central excise and service tax.

      According to the Constitution of India, the government has the right to levy taxes on organizations and individuals. However, the constitution states that no one has the right to levy taxes except the authority of law or the parliament. The main body, which is responsible for the collection of taxes, is the Central Board of Direct Taxes, which is a part of the Department of Revenue under the Ministry of Finance of the Indian government. The CBDT functions as per the Central Board of Revenue Act of 1963. In last 10-15 years, Indian taxation system has undergone wonderful reforms. The tax laws have been simplified and the tax rates have been rationalized resulting in better compliance, ease of tax payment and better enforcement.