Index Page 373 Thursday, August 24, 2006 3:02 PM Index Absolute prepayment rate, 89 Andacollo Gold Mine (market classes, Basel II capital require- Accelerated distribution percent- risk; operating risk), 274 ments, 294 age, 110 Annual percentage rate (APR), 86 correlation, 150 Accounting. See Capital; Operat- Anson, Mark J.P., 48 financing, 215 ing leases Application service providers gross amounts, 220–221 considerations. See Project (ASPs), 273 growth, support, 76 financing Arbitrage CDO, 120 managers, 122 equity method, 279 creation, 125 expectations, 62 Accreting swaps, 35–36 structure. See Synthetic arbi- pool, attributes, 85–87 ACE Guaranty Re, 106 trage CDO structure purchase, 172 ACG Trust III Arbitrage motivated CDOs, 124– remaining maturity, 292 asset analysis, 351 127 revolving pool, 116 collateral pool characteristics, Argentina, methodology test, 312– risk 346–347 313 identification/isolation, 5 default events, 349 Armstrong, Don, 224 transfer, 13 issuer overview, 346 Arturo Merino Benitez Interna- securitization, entity reasons, lessee analysis, 351 tional Airport, 267 70–79 maintenance, 351–352 Asian financial crisis, 285 transfer, 5 parties, roles, 349–350 Asset-backed CP (ABCP), 14, transformation, 143 payment structure, 348–349 157–162 value, difference, 84 portfolio details, 350–351 characteristics, 158–160 Asset swaps, 45, 54–57. See also presale, 345–352 conduit, 158–159. See also Investors profile, 345–346 Synthetic ABCP conduit agreement, 56–57 rationale, 346 credit enhancement, 160–161 spread, 56 remarketing agent evaluation, 350 hypothetical structure, terms, 163 structural features (removal), strengths/concerns, 347 issuance, 158 swaptions (usage), 57 surveillance, 352 issue/structure, 159 structure package, dealer cre- transaction structure, 347–348 liquidity support, 160–161 ation, 56–57 Actual/360 day convention, 48 market, 173 At the money option, 40 Actual/360 day count, 30 structure, illustration, 161–162 Auto loans, 159 Adams, Phil, 4 usage, 156 ABS, loan rate, 86 Adjustable-rate residential mort- Asset-backed presale report. See auto-loan-backed deals, pre- gage loans, backing, 100 CNH Equipment Trust payments, 89–90 Adjusted discount rate. See Dis- 2006-A Available funds cap, inclusion, 100 count rate Asset-backed securities (ABSs), 9, AXA Re Finance, 106 Adjusted present value technique, 65, 119. See also Auto 225 loans; Fully funded ABS Back-up servicer. See CNH Equip- Advance rate, 83 CDS, 9 ment Trust 2006-A After-tax proceeds, estimation, 227 collateral, 71 requirement, 81 ALCO 1 COPYRIGHTEDdeal, 124 MATERIALBaker, Cynthia A., 303 CDO, 152 investment, diversification, 124 Balance sheet Limited, 151 issuance, 70 asset-liability management, 162– structure/tranching, 153 issuers, 67, 81 163 Ambac Assurance Corporation, 106 products, 151 capital management, 77–78 American option, 37 sector, 63 CDOs, 120, 124 American-type options, 42 securitizing, benefits, 79 structure. See Fully funded Amortization schedule, 83 structured finance, 339–343 synthetic balance sheet Amortizing structures, revolving usage, 89, 140 CDO structure structures (contrast), 82–83 Assets static synthetic CDO, 143 Amortizing swaps, 35–36, 97 analysis. See ACG Trust III 373 Index Page 374 Thursday, August 24, 2006 3:02 PM 374 Index Balance sheet (Cont.) Bear Steans Asset Backed Securi- relief, 147. See also Regula- treatment. See Securitized expo- ties 1 Trust 2005-HE5 tory capital relief sures Asset-Backed Certificates, requirements, 286, 287 variable synthetic CDO, 143 Series 2005-HE5 issue, reduction, 76 Balance test, 113 101–102 sources, 278 Bank for International Settlement Benchmark yield, 135 diversification, 77 (BIS), 287 Bermuda option, 37 Capitalization, avoidance, 213– definition. See Structured finance Bidding process, 243 214 Bankruptcy, definition, 46 Black, Fischer, 42 Capital-markets-provided rein- Bankruptcy remote entities, 72 Black-Scholes option pricing surance, purchase, 7 Bankruptcy-remote legal entity, 159 model, 42 Capped interest costs, 302. See also Banks Boggiano, Kenneth, 143 Uncapped interest costs balance sheet impact. See Origi- Bond-insured security, 106–107 Caps, 43–44. See also Interest rate nating banks Bonds Captive finance companies, 13 capabilities, 286 basket, 168–169 Captive leasing, 216 debt-service LOC facility, 275 CLNs, term (reason), 183 Casecnan Water and Energy (coun- deposit-taking capabilities, 12 futures. See U.S. Treasury bonds terparty risk; construction lending, 12 insurance, 106–107 risk; political risk), 276 letter of credit, issuance, 106 issuance, 244, 251 Cash-and-carry trade, 26 loans, 119 principal, payment, 99 Cash collateral account (CCA). losses, 292 structure, 205 See CIT Equipment Col- savings product, offering, 7 turboing, 99 lateral 2006-VT1 Barajas, Dino, 20 Book earnings, leasing (impact), step-down feature. See CIT Barbour, Ian, 297, 301 216 Equipment Collateral Bargain purchase option, absence, Borderline cases/boundaries. See 2006-VT1 220 Structured finance Cash deal, 135 Bartlett, Beth, 4 Borod, Ronald, 4 Cash flow. See Leases Basel Committee, 286 Borrowers analysis, 116 Basel Committee on Banking bankruptcies, 91 arbitrage CDO, 124 Regulations and Supervi- equity, 84 CDOs, 119–120, 130 sory Practice, 287 Borrow-to-buy decisions, 232 structure, 122–123 Basel Committee on Banking Boundaries. See Structured finance distribution. See Principal cash Supervision, 296 Brazilian maxidevaluation (1999), flow Base lease term, 252 285 firmness, 16 Basel I, 288 Brealey, Richard, 229, 230 leasing, impact, 216 impact, 143 Bridge financing, 248–249 modeling. See CIT Equip- rules, 77 British Bankers Association, 45 ment Collateral 2006- shortcomings, 289 Broker-dealer VT1; CNH Equipment Basel II bond removal, 164 Trust 2006-A adoption, 291 payment difference, 165 payment structure, 80, 82 calculation method, 292 regulation, 177 probability adjustment. See capital requirements. See Assets Brokers, involvement, 242 Projected cash flows counterparty risk weights, 293 Brown, Joel W., 91 stream, 12 framework/securitization, 287 Build-own-transfer (BOT) stress, 80, 82 impact, 143. See also Credit power project, 275 waterfall, 107 derivatives; Securitization program, 272 Cash-generating assets, 5 rules, 288–293 project, 276 Cash inflow. See London Inter- Basel rules, 136 Business risk, 230 bank Offered Rate Base schedule, 110–111 Cash market instruments, pack- Basis risk, 98–102 Callable bonds, 9, 193 age, 28–30 Basis swaps, 36, 60 Call option, 37 Cash outlay, 29 Basket CLN, 190 strike price, 40 Cash reserve accounts, 128 Basket default swaps, 45, 51–54. Cancelable operating lease, 214 Cash reserve funds, 112 See also Senior basket Capital Cash securitization, 65 default swaps; Subordi- base, erosion, 292 Cash-settled CLN, 183 nate basket default swaps budgeting Cash settlement, 50, 191 Basket TRS, 163–165 analysis, discount rate (usage), Charge-off rate (COR), 91–92 Bautista, Alberto J., 225 226 Cheapest-to-deliver asset, 139 BCP (market risk; currency risk; decisions, 230 Cheapest-to-deliver issue, 26 political risk; high pur- conservation. See Working capital existence, 50 chase price), 273 leases, 219 Chen, Ren-Raw, 48 Beacon model, 85 accounting, 220–222 Chew, William, 18–19, 21, 279 Beale, Chris, 17 raising, method, 8 Chicago Board of Trade (CBOT) constraints, 40 Index Page 375 Thursday, August 24, 2006 3:02 PM Index 375 Chicago Board of Trade (Cont.) enhancement, 359–360 sponsor motivation, 124–127 Treasury bond futures con- default events, 362 structures. See Partially tract, trading, 25–26 discount rate, 356 funded synthetic CDO Choudhry, Moorad, 4, 48 excess spread, 360 structure; Synthetic arbi- Cilia, Joseph, 194 expected initial annual excess trage CDO structure; CIT Equipment Collateral 2006- spread, 360 Synthetic CDOs VT1 interest allocation, 361 structuring, benefit, 139 annual pool review, 369 legal structure, 358 usage, 11 cash flow modeling, 370 loan attributes, 359 yield spreads, 151 CCA, 369–370 loss Collateralized funded synthetic step-down feature, 366 allocation, 362 MBS, 299 changes, 366 estimate, 359 Collateralized loan obligations collateral recognition, 363 (CLOs), 119, 124 analysis, 368–369 named back-up servicer, 361 Collections. See CIT Equipment comparison, 368 operational review, 362–363 Collateral 2006-VT1 collections/servicing, 372 payment Commercial letter of credit, 106 credit priority, shift, 356 Commercial MBS (CMBS), 9, analysis, 369 waterfall, 361–362 63, 119 enhancement, 369 portfolio performance, 358 Commercial paper (CP), 155–157. cumulative net loss trigger, 371 prefunding account, 361 See also Asset-backed CP delinquency, 370 principal allocation, 361 interest, 159 expected ratings, 365 reserve account, 360 investors, 248 floors, 371 step-down trigger, 356 issue, 157 initial credit enhancement, 366 securitization history, 358 proceeds, 171 legal structure, 367 strengths/concerns, 355 market, 156 loss stress scenarios results, 361 rate, 97 estimate, 369 structural considerations, 361– usage, 155, 174 performance, 370 362 Committee on Bankruptcy and net loss trigger, 371 structured finance, asset-backed Corporate Reorganizations, operations review, 371–372 presale report, 355–363 Association of the Bar of the payment priority, 370–371 summary, 355 City of New York, 2, 3 performance analytics, 365 transaction, parties (involve- Committee on the Global Finan- portfolio performance, 367 ment), 356 cial System (BIS), 2 securitization history/perfor- CNH Global N.V., 357 Commodity Futures Trading Com- mance, 367–368 Collars, 44 mission (CFTC), 21 segment