Research On Asset Securitization Of Financial Leasing Project With Local Urban Construction Investment Company

Financial lease, as an innovative bond financing channels, has become the second largest financing tool in the international capital market. In the past two years, with many corresponding policies of financial lease have been published, the number of financial leasing companies increased rapidly and the business scale developed fast, more and more financial lease companies cooperated actively with local urban construction investment corporation (UDIC) in many projects, since local urban infrastructure construction investment corporation has strong demand for funds and own many underlying assets suitable for financial lease. However, financial lease corporations also have their own development plight, it’s hard and costly for them to finance, the business scale is limited to expand, it could promote the further development of financial lease if take the UDIC financing leasing project for asset securitization. According to the current situation of UDIC financial leasing projects, we analyze the effect and feasibility for asset-backed securities (ABS) of UDIC financial leasing projects, I think ABS of UDIC financial leasing projects is great, it can not only revitalize the leasing project assets inventory, improve leasing company’s earnings, solve the leasing company’s financing difficulties, but also realize the leased asset out of the balance sheet, optimize leasing company capital structure, release its business lever limits and eliminate the term mismatch risk between the leasing projects and the bank loan.Z company is a leading financial lease companies in Anhui province, it has large number of UDIC financial leasing projects which is appropriate to package for the asset securitization asset pool. We designed the ABS program of UDIC financial leasing projects based on the actual business situation of Z company. Firstly, we try to design the product, by building the basal pool of asset, designing hierarchical production, pricing the production and analyzing the flow of cash. We select three UDIC financial leasing projects into the pool by features of underlying asset, we separate the production to four levels (First A-l, First A-2, First B and Secondary) with the term structure of the three UDIC financial leasing projects, in the meantime, we determine the interest rates of the product according to the Shanghai interbank interest rates and the non-financial corporate debt financing tool pricing estimate in a recent month. Secondly, we elaborate more details about the establishment of SPV, the selection of credit enhancement, the credit rating. To enhance the credit of the specific asset management plan of Z company’s UDIC financial leasing projects, we arrange priority/secondary structure, excess mortgage, cover accounts, complement promises as internal credit promotion measures, shareholders’guarantee as external credit promotion measures. Finally, we assign the transaction structure, build the flow scheme of the plan, determine the responsibility and duty for each participant, make the asset-backed securities listed on the stock exchange, supervise it’s negotiation strictly. In the meantime, we analyze the financial effect of this ABS product, while investor get safe and high yield investment opportunities, Z company obtain capital with low cost.We also illustrate the issues to be noticed in the implementation of the ABS program of UDIC financial leasing project. In the design stage of asset securitization, we need to select the underlying asset strictly as UDIC financial leasing project is difficult to meet the quality requirements of underlying assets which formed the asset pool, because of the high concentration of funds in the UDIC financial leasing project. Encourage more small-sized leasing companies try to combine together for asset securitization which can reduce their financing cost. Strengthen the supervision and management of each participant in the asset securitization and enhance their service capacity, in case they are unable to provide fair and objective evaluation service consequent on ability lackness and responsibility negligence. In the operation phase of asset securitization, we must strengthen information disclosure, especially the supervision of the asset pool, beware of the mismatch risk of cash flow in asset pool. And we need to encourage innovation in asset securitization, improve the market liquidity of asset securitization products gradually. In this way, financial lease can achieve great momentum to develop.