Securitization Transactions as a Funding Strategy
A significant portion of our funding relies on securitization transactions, which provide long-term stable financing and structural leverage to enhance returns and mitigate risk.
In these transactions, we create senior and subordinate notes. We sell the senior bonds to a third party and we retain the subordinate bonds. Our subordinate bonds include the first-loss bonds that are usually subject to the risk retention rules.
We also generally retain a call option, which we may exercise to liquidate the original securitization trust. This allows us to receive the remaining collateral and securitize the remaining collateral in a new securitization to reduce the related financing costs or to increase the structural leverage.
View Consolidated Loan Securitization
The hypothetical diagram below shows the typical structure of our securitization transactions.