Securitisation normally involves a wide variety of counterparties and advisers. On one particularly complex transaction a few years ago there were 6 law firms, 3 firms of accountants, 1 insurance broker, 1 investment bank, 1 consultant and 12 principals (banks, originators, administrators, credit enhancers, underwriters and so on).

A transaction normally involves the following parties:

1. Originator and Administrator

2. Lead Underwriter � who purchases the debt issued by the SPV (and sells it to eurobond investors)

3. Structuring Team � either involving personnel from the lead underwriter and/or other advisers

4. wo sets of lawyers, at least one of whom is a securitisation specialist

5. Trustee and Trustee's lawyers � representing the interests of the noteholders in the event that there is (a) an enforcement event (things go wrong) or (b) any requirement to change or amend the documents or procedures after the transaction completes;

6. Rating Agencies � required to undertake an analysis of the risks associated with the transaction and to award a credit rating to the debt issued

7. Originator's accountants � to agree accounting treatment for the transaction, to verify the analysis and existence of the assets involved and to confirm work undertaken to show solvency Credit Enhancement Providers and their lawyers � transactions often involve a third party fronting some of the risks associated with the assets

8. Standby Servicer and their lawyers � a third party prepared to administer the assets in the event that the existing servicer fails or is incompetent; this is now becoming a requirement for all transactions where the administrator does not already have at least an A1/P1 short term rating

9. Clearing Bank and its lawyers � running the originator's and the Issuer's bank accounts, all of which normally require new mandates and a Bank Agreement is also set up to regulate the operation of all aspects of the accounts

10. Banking Facility Providers and their lawyers � often there are requirements for additional banking facilities, eg: liquidity facilities or guaranteed deposit arrangements ("GICs")

11. Hedging Providers and their lawyers � assets often need some form of hedging, either using swaps, caps or both

12. Paying Agents, Agent Banks, Common Depositary etc.. a whole host of organisations with mysterious Euromarket responsibilities

13. Printer � to produce the prospectus (choosing the wrong printers can cause the transaction to fail)"

Certification by Rating agencies, who comment on asset�backed transactions is a necessary formality." A rating normally covers the FULL and TIMELY payment of interest and principal on the rated notes. The "full" part means that investors get all of their money back; the "timely" part means that the money is paid on time. These two elements equate to credit risk and liquidity risk."

CREDIT RISK:
"Rating Agencies really only deal with credit risk as a commercial matter (ie: they will make an assessment of credit risk). All other risks have to be structured out, dealt with beyond doubt or shown to be sufficiently remote. Sufficiently remote normally means inconceivable. Any residual concerns which are not specifically analysable as credit risks will involve serious costs for the structure (eg: corporation tax and VAT risks).

SOLVENCY:
Rating "agencies need to feel comfortable that the seller of the assets is solvent and is expected to remain solvent for a period of two years from the date of the transaction. Proving solvency to this standard is not a straightforward exercise. The legal definition of solvency is a 20 page paper, and the tests which are necessary to show that a company is solvent can be tortuous. A true solvency analysis will also take into account contingent assets and liabilities (including deferred tax) which are not normally shown on the face of a balance sheet, and will require a comprehensive and detailed analysis of the balance sheet and projected cash flows.

TAX RISKS:
"The rating agencies require tax, accounting and actual cash surpluses to be in step (or to the extent out of step, so that it does not matter) throughout the transaction and in a variety of tax, interest rate and credit environments.

SPECIFIC LEGAL RISKS:
"This is an area which the lawyers specialising in securitisation will be able to advise on more fully. These are normally dealt with by either investigation or by the production of an opinion

Review / presentation:

The rating agencies will wish to visit the originator/administrator to assess the quality of the management, the way that the company is set up and to review the administrative procedures.

Prior to the visit, it is normal practice to prepare a file on the company including financial information, procedures, company history, senior staff biographies and example contracts. Collating and preparing this information normally takes several weeks.

Asset analysis:

This is the one risk which the rating agencies are prepared to take a commercial view on. This view is based upon an analysis of the asset pool proposed to be securitised, and a review of the historical performance of the originator's assets based upon certain assumptions. Generally the golden rules are:

1. present your data appropriately (detailed advice is required on this point, since the exact approach should be closely linked to the way that the transaction is to be structured), and

2. generate as much data as possible � irrelevant data can be discarded, but data which is missing is impossible to replace; rating agencies, in the absence of data, make conservative guesses (eg: 100% default rates, no recoveries etc..).

Once they have reviewed this information, the rating agencies will make an assessment of their worst case expectations as to the performance of the portfolio (normally absolutely dismal, of course). The structure then has to be designed to ensure that, should these losses appear, the rated debt is paid in full and on time.

Transaction analysis:

This involves the production of detailed computer models of the transaction, which are then used to determine the way in which the structure will behave in different stress environments. Typical variables are: credit loss levels, delinquency levels, interest rates, corporation tax rates, VAT rates etc.. Each rating level normally has associated with it a certain combination of stress assumptions, becoming more stressful for higher ratings.

The rating process is complicated, but not too mysterious. Managing the rating process is a key element in the control of the transaction. Our advice is always that it is the originator who should control this process. As a result, the selection of the originator's advisers is a crucial element in ensuring a successful and controlled transaction - since it is through the assistance of these persons that the rating agency relationship is maintained. Several transactions which we have worked upon have changed radically as a result of the mismanagement of the rating process by third parties over whom the originator had no control.

There are four basic ways which can be used to uplift the credit quality of a portfolio of assets to a highly rated level; often these are used in combination:

1. Subordination or over�collateralisation:
   splitting the Issuer liabilities into different classes: senior, mezzanine and junior (for instance), and arranging to pay them in that order, so that the senior liabilities are effectively protected by the existence of the subordinated liabilities

2. Insurance:
   insuring the credit performance of the assets (so that, from the Issuer's perspective, losses do not occur)

3. Financial Guarantee:
   arranging for the Issuer's obligations under the rated notes to be guaranteed (so that if the Issuer is unable to make a payment, then someone else will make it for him)

4. Letter of Credit:
   arranging for a bank facility which the SPV can draw down in the event that it suffers significant credit losses.

It has been our experience that senior-subordinated structures are the easiest to implement, (provided that the computer modelling work is done well), for the simple reason that the real risk takers in the transaction structure (the Mezzanine Noteholders) are not present at the negotiations.