Securitization transaction could be defined as the act of converting an asset into marketable securities, usually for the purpose of obtaining cash.
The concept is based on international market practices involving financial transactions in which a company pools assets, mostly accounts receivable, and then transfers them to a special purpose entity or vehicle, which finances the acquisition by issuing bonds. values.
Securitization is usually an enhancement of the financing of existing business operations.
Securitization transactions are very popular among mortgage-backed securities; there are now more types of non-financial assets and future cash flows. The following are examples of assets that can generally be insured.
Aircraft leases, auto loans (prime and sub-prime), car leases, boat loans, credit card receivables, equipment leases, home equity loans, manufactured home contracts, shipping container and container leases chassis, mortgages (residential and commercial). The remainder is rail car leases, real estate, RV loans, royalty streams, stranded utility costs, trade receivables, rail car leases, truck loans, oil exploration, and other future receivables.
The Ghana School Financing Facility is the first official “securitisation transaction” in Ghana. This is a structured risk-sharing facility that covers the initial portfolio of long-term loans in local currency from a local school partner bank. The goal was to help local banks learn how to make money and also contribute to the development of the country.
The International Finance Corporation (IFC) provides advisory services to banks to process and monitor school loans while helping local schools with management training and strategic planning to enable schools to operate more like sustainable businesses. This helped improve their credit risk profile with banks.
IFC established a $2.1 million risk-sharing facility with Trust Bank Ltd of Ghana, supplemented by advisory services from IFC and the African Development Bank for Trust Bank and its client schools.
The Trust Bank is expected to increase its size and financing to private schools, implement a cost-effective alternative financing mechanism for schools. It will also give the bank the opportunity to prepare for the securitization transaction when the market is ready.
Below is an industry perspective for a potential securitization transaction in Ghana.
Ghana has a modest upstream oil industry with one sedimentary basin on land and five offshore. The main driver behind the oil and gas industry in Ghana is the need to reduce the country’s dependence on hydroelectricity.
The authorities usually aim for a “primary” budget surplus to reduce the overall budget deficit and domestic debt. Oil subsidies were reduced, but public sector wages were increased. However, the recent computerization of customs should increase fiscal and public sector revenues and contain the overall budget deficit.
A series of initiatives to boost cassava, textiles and palm oil should boost non-traditional exports, while high cocoa and gold prices should lead to higher export earnings. High oil prices continue to hurt Ghana. Oil imports are estimated to account for more than 20% of the total import bill, leaving the economy vulnerable to large price swings. Large transfers, IFI credits, donor support, and generous Paris Club debt relief have brought external current account deficits to more manageable levels.
Schemes and reforms, such as raising low electricity rates to international levels. Since the mid-1980s, the Government of Ghana has been financing projects using small levies on petroleum products. The US$250,000 raised annually is paid into an Energy Fund and used to promote renewable energy and energy efficiency projects.
In Ghana, oil operations are governed by the Petroleum Act of 1984, which empowers GNPC to operate in the entire open area of the country on its own or in association with foreign partners.
Smaller companies find it easier to explore in Ghana than in some of its West African neighbors. This is due in part to advantageous contract terms that include the following elements: No upfront payments such as signing or production bonuses; tradable royalties and income tax (currently 35%); no cap on cost recovery, low rental payments, no restrictions on repatriation of funds and no import duties on E&P equipment and materials…
With securitization, GNPC can securitize its rights to receive payments for crude sold to other oil refiners. The agreements representing those accounts receivable must be drafted in such a way that the non-transferability clauses in favor of the refiners, for example, are beneficial, but they must not be applied, since by doing so, the securitization cannot continue. Prayed.
1. Africa -Ghana Organizing in the Informal Sector (Online) (Accessed April 29, 2006)
2. Ghana Chamber of Commerce Newsletter
3. Ghana Self-Assessment (online) available at ghanaembassy.dk/tax/asp.cata.org.my/Ghana1 accessed 06/21/07
4. Private Sector Development Strategy for Ghana (online) available at dfid.gov.uk/pubs/files/ghana/priv-sect-dev-strategy/ accessed 06/21/07
5. Securities Exchange Commission Annual Report (online) available at secghana.org/publications/annualreport/ accessed 06/21/07