Asset-Backed Security)

ABS refers to the securities issued with a portfolio of assets as collateral guarantee, which are generally bonds. So far, there are several types of assets that can be securitization: (1) housing mortgage loans, (2) Accounts receivable, (3) consumer loans, including auto loan, student loan, house construction loan, etc., (4) Equipment Rental loan: (5) credit card.

According to the think tank encyclopedia, ABS Financing is divided into six main stages:

Stage 1: set up a special project financing company. In ABS Financing Mode, the project owner needs to set up a special project financing company, which can be called a trust and investment company or a credit guarantee company. It is an independent legal entity. This is a prerequisite for ABS Financing.

Stage 2: seek a credit evaluation institution to grant the financing specialized company the highest possible credit grade. An authoritative international credit evaluation agency, after the feasibility study of the project, grants the Project Financing Company A grade AA or AAA credit grade based on the forecast of the future earnings of the project assets.

Stage 3: the project owner (the Fund owner) transfers the future income right of the project. By signing a contract, the project owner shall assign full ownership of project financing, construction, operation, and debt repayment to the project financing special company during the concession period.

Stage 4: a special project financing company issues bonds to raise project construction funds. As the project financing specialized company has a high credit level, its bond credit level is also above a level. As long as the bond is issued, it will attract a large number of investors to buy it, the funding cost is significantly lower than other funding methods.

Stage 5: a special project financing company organizes project construction, project operation, and uses project income to repay the debt and interest.

Stage 6: Upon expiration of the license, the project financing special company transfers the project assets without charge as stipulated in the contract, and the project owner obtains the ownership of the project.