Asset-backed bonds, a form of debt security backed by a pool of assets, are becoming increasingly popular as a financing option for businesses. Issuing an asset-backed bond through a Special Purpose Vehicle (SPV) can provide significant benefits to issuers, but the process of obtaining a rating can be complex and time-consuming. In this article, we will discuss the detailed steps involved in obtaining a rating for an asset-backed bond issued by an English SPV, and explore how Truva Corp can guide issuers and arrangers through this complicated process.
Step 1: Establish the SPV
An SPV is a separate legal entity created to isolate the assets backing the bond from the issuer’s other operations. To establish an English SPV, issuers must register the company with the Companies House, obtain a registered office address, and appoint a director and a secretary. Once the SPV is established, the assets intended to back the bond can be transferred to the SPV.
Step 2: Engage a Rating Agency
Issuers must work with a credit rating agency to determine the creditworthiness of the asset-backed bond. The agency will assess the bond’s risk level and assign a rating, which can impact the bond’s marketability and interest rate. Reputable rating agencies include Standard & Poor’s, Moody’s, and Fitch Ratings.
Step 3: Prepare Documentation
The issuer must provide comprehensive documentation to the rating agency. This includes a detailed description of the assets backing the bond, the bond’s structure, and the terms of the bond issuance. Additionally, the issuer should provide financial statements, an overview of the SPV’s management, and any relevant legal documents.
Step 4: Rating Agency Assessment
The rating agency will review the submitted documentation and conduct an in-depth analysis of the bond’s risk profile. This analysis may include evaluating the quality of the underlying assets, assessing the bond’s structure, and reviewing the creditworthiness of the issuer. The agency may request additional information or clarification during this process.
Step 5: Preliminary Rating
Once the rating agency has completed its assessment, it will issue a preliminary rating for the bond. This rating is subject to change based on further information or changes to the bond’s structure.
Step 6: Finalise Bond Structure and Documentation
The issuer, in collaboration with the arranger, will finalise the bond structure and documentation based on the preliminary rating. This may involve making adjustments to the bond’s terms, asset pool, or other features to meet the desired rating and marketability.
Step 7: Obtain Final Rating
After finalising the bond structure and documentation, the issuer will submit the updated information to the rating agency. The agency will review the changes and issue a final rating for the asset-backed bond.
Truva Corp: Your Partner in the Asset-Backed Bond Rating Process
Navigating the intricate process of obtaining a rating for an asset-backed bond issued by an English SPV can be daunting. Truva Corp, a leading advisory firm, can provide invaluable support to issuers and arrangers at every stage of this process. With extensive experience in bond issuance and a deep understanding of the UK market, Truva Corp can help you:
- Establish the SPV and transfer assets efficiently.
- Select and engage with the right rating agency.
- Prepare comprehensive and accurate documentation.
- Address the rating agency’s concerns and navigate the assessment process.
- Optimise the bond structure and documentation to achieve the desired rating.