Securitization of Mezzanine Capital in Germany
Financial Markets and Portfolio Management, Vol. 22, No. 3, pp. 219-240, 2008
Posted: 17 Sep 2008
Date Written: July 8, 2008
Abstract
A recent trend in the German asset-backed securities (ABS) market is the securitization of subordinated loans and profit participation agreements (PPAs) granted to medium-sized enterprises (MEs). This paper provides an overview of this growing market and analyzes the benefits of such transactions for portfolio companies as well as for originators and potential investors. Simulations of 10 recent transactions indicate that despite the relatively low interest rates charged on obligors, originators and investors can earn attractive returns at fairly low risk. In particular, the junior tranches of these securitizations exhibit quite attractive risk-return profiles.
Keywords: Securitization, Middle market transactions, Mezzanine loans, Medium-sized enterprises, Junior tranche
JEL Classification: G10, G21, G24
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