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True Sale Securitization (ABS)

Sell receivables to an SPV which issues asset-backed securities to investors. True legal and risk transfer.

Distribution
Complexity
Advanced
Deal Size
$100M - $5.0B
Typical Tenor
5 years
Scalability
Low
#securitization#abs#true-sale#capital-relief#structured-finance
Mini Map

Flow Types

Cash
Securities
Interest
Principal
Receivables

Transaction Timeline

Phase 1: Asset Transfer(T+0)

Originator sells asset pool to SPV via true sale with full legal isolation.

Use Cases

  • •Free up capital for new lending
  • •Diversify funding sources beyond deposits/bonds
  • •Convert illiquid loans into liquid securities
  • •Achieve accounting derecognition
  • •Access capital markets for non-bank originators

Problem Solved

Originators get immediate funding and balance sheet relief. Investors get access to diversified asset pools with credit tranching.

Revenue Calculator

Model deal economics

$500M
$100M$5.0B
71 bps
5 bps200 bps
10 bps
170 bps

Projected Revenue

Gross Carry Income$1,775,000
Funding Cost($250,000)
Net Carry$1,525,000
Upfront Fees$8,500,000
Total Revenue$10,025,000
Annualized Return
401.0 bps
If Repeated Annually
$20,050,000

Revenue Sources

Carry Income

Excess Spread25-75 bps

Difference between asset yield and weighted average note cost

QuarterlyPool Yield - Weighted Avg Note Rate - Losses - Expenses
Servicing Fee25-50 bps

Fee earned by originator for servicing the assets

MonthlyOutstanding Balance × Annual Servicing Rate / 12
Residual Value50-200 bps

Equity holder receives remaining value at deal end

At Maturity

Fee Income

Structuring/Arrangement FeeOne-time
50-150 bps

One-time fee for deal structuring

Underwriting FeeOne-time
25-75 bps

Fee for underwriting note placement

Legal & Rating FeesOne-time
10-30 bps

Upfront legal, rating agency, and trustee setup

Regulatory Checkpoints

True Sale OpinionLocal Law

Legal opinion confirming bankruptcy-remote true sale of assets.

⚠️ Critical for balance sheet derecognition

Risk RetentionEU STS / US Risk Retention

Originator must retain 5% economic interest in the transaction.

Risk Flags

Moral HazardHigh

Originator may weaken underwriting if selling all risk

Mitigation:Risk retention requirements, ongoing monitoring, alignment of interests
Complexity RiskMedium

Structure complexity can obscure true risks

Mitigation:Clear documentation, investor disclosure, independent valuation
Prepayment/Extension RiskMedium

Asset prepayments or extensions affect note cash flows

Mitigation:Prepayment modeling, reserve funds, liquidity facilities
Reputational RiskMedium

Poor asset performance reflects on originator

Mitigation:Strong underwriting standards, transparent reporting