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Securitization of mezzanine capital in Germany

  • Günter Franke

    ()

  • Julia Hein

    ()

A recent trend in the German Asset Backed Securities (ABS) market is the securitisation of subordinated loans and profit participation agreements (PPAs) granted to medium-sized enterprises (MEs). This paper provides an overview of this growing market and analyses the benefits of such transactions for the portfolio companies as well as originators and potential investors. Simulations of ten recent transactions indicate that despite of 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 securitisations exhibit quite attractive risk-return profiles.

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File URL: http://hdl.handle.net/10.1007/s11408-008-0082-x
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Article provided by Springer in its journal Financial Markets and Portfolio Management.

Volume (Year): 22 (2008)
Issue (Month): 3 (September)
Pages: 219-240

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Handle: RePEc:kap:fmktpm:v:22:y:2008:i:3:p:219-240
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=119763

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  1. Guenter Franke & Jan Pieter Krahnen, 2005. "Default Risk Sharing Between Banks and Markets: The Contribution of Collateralized Debt Obligations," NBER Working Papers 11741, National Bureau of Economic Research, Inc.
  2. Michael Verhofen, 2005. "Markov Chain Monte Carlo Methods in Financial Econometrics," Financial Markets and Portfolio Management, Springer, vol. 19(4), pages 397-405, December.
  3. Acharya, Viral V. & Bharath, Sreedhar T. & Srinivasan, Anand, 2007. "Does industry-wide distress affect defaulted firms? Evidence from creditor recoveries," Journal of Financial Economics, Elsevier, vol. 85(3), pages 787-821, September.
  4. Günter Franke & Markus Herrmann & Thomas Weber, 2007. "Information asymmetries and securitization design," CoFE Discussion Paper 07-10, Center of Finance and Econometrics, University of Konstanz.
  5. Bernd Brommundt & Jochen Felsenheimer & Philip Gisdakis & Michael Zaiser, 2006. "Recent Developments in Credit Markets," Financial Markets and Portfolio Management, Springer, vol. 20(2), pages 221-234, June.
  6. Michael S. Gibson, 2004. "Understanding the risk of synthetic CDOs," Finance and Economics Discussion Series 2004-36, Board of Governors of the Federal Reserve System (U.S.).
  7. Julio Pindado & Luis Rodrigues, 2005. "Determinants of Financial Distress Costs," Financial Markets and Portfolio Management, Springer, vol. 19(4), pages 343-359, December.
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