macq
Member of DD Central
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Post by macq on Jul 21, 2017 14:43:32 GMT
hi-with the RAC bond it says asset security is whole business securitisation is that the same as senior secured or better/worse ?
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Post by Wisealpha on Jul 21, 2017 15:06:40 GMT
It also means the debt is secured but by the whole business - it's just a slightly different structure where there is tighter covenants on the company on actions it can do in response to various financial metrics.
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macq
Member of DD Central
Posts: 1,924
Likes: 1,192
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Post by macq on Jul 21, 2017 16:11:32 GMT
It also means the debt is secured but by the whole business - it's just a slightly different structure where there is tighter covenants on the company on actions it can do in response to various financial metrics. so safer?
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Post by Wisealpha on Jul 21, 2017 16:23:39 GMT
The way you should think about risk is taking into account the amount of debt in the company's capital structure, it's cashflow, stability in performance. In general whole business securitisations are normally done for stable companies in less competitive industries or if they have a large property value also backing the debt, however these companies also tend to issue a relatively higher amount of debt and have more leverage so from this perspective you could say more leverage risk but the business is usually more mature and stable.
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