Conduit Management

1
October 25-26, 2007
Strategies for Mitigating Risk and Reducing
Capital
Omar Olaf Bolli Managing Director Asset Backed
Finance Norddeutsche Landesbank
2

• Trade Receivables Securitization
• General Requirements
• Eligible Receivables
• Eligible Obligors and Amounts
• Limits based on Credit Quality
• Objective is to achieve Risk Diversification
• Credit Enhancement based on
• Portfolio Performance
• Obligors concentrations
• Factors specific to the transaction

3
Trade Receivables Securitization The Traditional
Model
Structure Transaction
Obligor Limits based on Credit Quality Credit
Enhancement based on Portfolio Performance and
Obligor Concentrations
Sponsor (Administrator)
Provide Liquidity
Liquidity Bank(s)
Provide LOC or Surety Bond
Obligors
Credit Enhancement
Asset Rights
Liquidity
Eligible
Receivables
Credit Enhancement
Asset Sale
/
Originator (Seller / Servicer)
True
Bankruptcy Remote SPV
CP-Investors
ABCP Conduit
or Loan
Sale
4

• Credit Insurance
• Needed to Cover
• Excessive Obligor Risk
• (Amount of Receivable vs Financial Capacity of
  Obligor)
• Unacceptable Country Risk
• Currency Conversion Risk
• Transferability Risk
• General Economic Risk

5

• Credit Insurance Model 1
• Insurance Covers
• Eligible Receivables from Approved Obligors based
  on specific Limits
• Overcollateral covers co-insurance, if any
• Other minor reserves (for interest rate
  volatility etc.)
• Credit Insurance Model 2
• Insurance Covers
• Eligible Receivables from Approved Obligors based
  on maximum general obligor limit (say 2)
• Eligible Receivables from Approved Obligors based
  on specific higher limits

PLUS

• Overcollateral or other Transaction Credit
  Enhancement based on traditional trade
  receivables critieria
• Insurance covers losses in excess of transaction
  credit enhancement

6
Trade Receivables Securitization Credit
Insurance Model 1
Structure Transaction
Insurer Insurance Coverage Approved Obligors
only within Specific Limits
Sponsor (Administrator)
Provide Liquidity
Liquidity Bank(s)
Provide LOC or Surety Bond
Obligors
Credit Enhancement
Asset Rights
Eligible
Receivables
Liquidity
Credit Enhancement
Asset Sale
/
Originator (Seller / Servicer)
True
Bankruptcy Remote SPV
CP-Investors
ABCP Conduit
or Loan
Sale
7
Trade Receivables Securitization Credit
Insurance Model 2
Insurer Insurance Coverage Eligible Obligors
within General Limits (say 2) Plus specific
Approved Obligors within Higher Limits
Structure Transaction
Sponsor (Administrator)
Provide Liquidity
Liquidity Bank(s)
Provide LOC or Surety Bond
Obligors
Credit Enhancement
Asset Rights
Eligible
Receivables
Liquidity
Credit Enhancement
Asset Sale
/
Originator (Seller / Servicer)
True
Bankruptcy Remote SPV
CP-Investors
ABCP Conduit
or Loan
Sale