• The common element of securitization of future flows, whole business or operating revenues securitization, and securitization of embedded profits in insurance businesses is that they all relate to profits or cash flows out of future operations.

• While traditional asset-backed transactions relate to assets that exist, future flows transactions relate to assets expected to exist, examples being air ticket sales, electricity sale, telephone rentals, and export receivables from natural resource.

• The essential premise in a future flows securitization is if a framework exists that will give rise to cash flows in the future, the cash flows from such framework is a candidate for securitization; if the framework itself does not exist, the investors would be taking exposure in a dream because their rights would probably be worse than for secured lending.

• The key features of future flows deals are (1) the transferring of only a certain portion of the receivables to the trust with the originator retaining the excess over the transferred portion; (2) the use of a cash flow trapping device; (3) the prioritization of the transferee since that entity is concerned with only the cash flows transferred; (4) greater overcollateralization than traditional asset types that have been securitized; (5) restrictions on the borrower’s business; (6) unlike traditional securitizations that are structured to be independent of the originator, future flows deals are highly dependent on the originator’s performance; and (7) not off-balance sheet.

• The extent of borrowing possible in future flows deals is determined by the cash flows and the level of overcollateralization required.

• Future flows transactions are classified depending on whether the securitization is based on: (1) exports of goods or services; (2) sales of goods and services; (3) financial futures flows; or (4) other futures flows.

• Unlike traditional securitizations, future flows transactions are confronted with several risks relating to the originator as well as the obligors and, therefore, these transactions rely on both structural features and credit enhancements to deal with risks.

• The structural features in future flows transactions include (1) either complete originator-dependence or peripheral originator dependence; (2) creation and maintenance of overcollateralization and a reserve; (3) early amortization triggers; (4) more comprehensive representations and warranties of the originator/seller than in a traditional securitization; and (5) an insurance guarantee in the case of emerging market future flows deals.

• A whole business securitization (also known as corporate securitization , corporate entity securitization, operating revenues securitization , or hybrid finance) captures the residual value of a business (i.e., the valuation of the business) and creates securities that represent this residual value.

• In most whole business securitizations the SPV issues bonds in the market and with the funds so collected provides a loan to the operator (originator).

• Whole business transactions are based on a loan structure which is in contrast to a traditional securitization wherein the SPV purchases the assets of the originator (a true sale structure) rather than making a loan (based on the capitalization of operating profits) to the operating company.

• In a whole business securitization, the originator agrees to repay the loan in fixed installments of interest and principal and the SPV using these installment payments to pay off the obligations on the bonds it issued.

• Whole business securitizations are not designed to be bankruptcy remote as far as the originator is concerned because there is no sale, and hence, no true sale, of the assets to the lending SPV.

• Unlike traditional securitizations, whole business securitizations are characterized more by structural protection (i.e., a strong collateralized lending transaction) than by the typical hierarchy of credit enhancements.

• The common structural enhancements in whole business securitizations are (1) breach of covenants/administrative receivership, (2) financial covenants, (3) liquidity facilities, (4) working capital facilities, and (5) restrictive covenants.

• The cash flow waterfall for whole business securitizations generally cover the following scenarios: (1) preenforcement (i.e., until the trustees’ security interest has been enforced); (2) postenforcement (i.e., after the trustees have decided to invoke the security interest); and (3) postacceleration (i.e., if decided to take the business down the winding up route).

• Some significant attributes of the operating entity in a whole securitization are (1) entry barriers, (2) demonstration of successful presence, (3) maintainability of future profits, (4) realizable asset value, (5) brand name, and (6) stable management and efficient internal controls.

• A relatively new asset class in the securitization market is the securitization of the value of in-force life insurance policies, or the embedded value of life insurance.

• Unlike other risk transfer devices, securitization of life insurance profits is not essentially a risk transfer device but predominantly a device to monetize the profits inherent in already contracted life insurance policies.