Securitization of car financing assets: a capital raising strategy

Securitization is a structured finance solution that has the potential to raise cost-effective capital from capital markets by selling securities that are backed by a portfolio of cash flow generating assets. This study provides insight in the possibilities of performing an asset-backed securitization program as a funding solution for a finance company and gives advice on the steps to be taken in order to facilitate a securitization funding strategy. We have developed an assessment model in which we formulated three criteria to weigh different securitization structures against each other. Based on the flexibility, certainty and the cost-effective deal size of the structures, we have determined which structure is most suitable for the finance company. To increase the quality of a potential securitization transaction, we have established a framework of the key rating drivers to get grip on the rating and pricing process of the potential securitization transaction. This framework enables us to quantify and control the indicators of influencing factors that are used by rating agencies to estimate the variables that determine the level of credit risk and residual value risk.