Table of Contents
Preface xix
Introduction 1
A Brief History of Structured Finance 1
Defining Structured Finance 4
Why was Structured Finance Set Up? 6
PART I Leveraged Buyout (LBO) 13
CHAPTER 1 What is an LBO? 15
1.1 The Main Features of an LBO 15
1.2 A Three-step Leverage 17
Case Study 1: The Harley-Davidson LBO (1981-1986) 22
CHAPTER 2 The Different Stakeholders 26
2.1 The Target Company 26
2.2 Buyers 35
2.3 Lenders 40
Case Study 2: Michael Milken and the Birth of the High-Yield Bond Market 47
Case Study 3: Malcolm Glazer and the Manchester United LBO 53
CHAPTER 3 The LBO Process 63
3.1 The Sale Process 63
3.2 Exit Strategies 72
3.3 LBO and Private Equity 77
Case Study 4: Hilton Hotels LBO, the Most Profitable Private Equity Deal Ever 85
Summary LBOs: What Have We Learnt? 92
PART II Project Finance 95
CHAPTER 4 The ABC of Project Finance 97
4.1 Definition 97
4.2 Why Choose a Project Finance Structure 99
4.3 Constraints of the Project Finance Structure 103
4.4 How to Choose between Corporate and Project Financing 103
Case Study 5: The Construction of the Eiffel Tower 105
CHAPTER 5 The Main Parties to Project Financing 110
5.1 Different Types of Projects 110
5.2 Sponsors 117
5.3 Lenders 127
5.4 The Role of Public Authorities 140
Case Study 6: The Near Bankruptcy of Disneyland Paris 142
CHAPTER 6 Project Finance Structuring 149
6.1 Preliminary Analysis of the Project 149
6.2 Project Finance Legal Structure 156
6.3 Financial Structure 166
Summary Project Finance: What Have We Learnt? 173
PART III Asset Finance 175
CHAPTER 7 Definition of Asset Finance 177
7.1 The Scope of Asset Finance 177
7.2 How to Finance Assets 178
Case Study 7: Richard Branson and the Beginnings of Virgin Atlantic 196
CHAPTER 8 The Stakeholders 200
8.1 Clients 200
8.2 Lessors 210
8.3 Lenders 222
Case Study 8: The Rise and Fall of GPA Group, the First Giant Aircraft Leasing Company 230
CHAPTER 9 Behind the Scenes 238
9.1 Inside a Leasing Company 238
9.2 Legal Considerations 243
9.3 The Dynamics of Leasing Markets 250
Summary Asset Finance: What Have We Learnt? 254
PART IV Securitization 255
CHAPTER 10 The Securitization Process 257
10.1 Transforming Illiquid Assets into Liquid Securities 257
10.2 Tranching of Securities 258
Case Study 9: The Securitization of David Bowie's Intellectual Property Rights 264
Case Study 10: What is a Covered Bond? 267
CHAPTER 11 The Different Stakeholders 272
11.1 Borrowers 272
11.2 The Originator 274
11.3 Around the SPV: The Transaction's Life 276
11.4 The Investors 280
Case Study 11: The Subprime Crisis 285
Case Study 12: Michael Burry's Big Short 294
CHAPTER 12 Structuring a Securitization 299
12.1 Composition of the Collateral 299
12.2 Managed Transactions 302
12.3 Additional Structuring Considerations 311
Case Study 13: Whole Business Securitization 324
Summary Securitization: What Have We Learnt? 327
Conclusion 329
Structured Finance: What Have We Learnt? 329
A Comparison of Various Types of Structured Finance 330
What is the Future for Structured Finance? 332
Appendix A How Banks Set Interest Rates 336
Appendix B Syndication and Club Deals 341
Appendix C Credit Derivatives 347
Bibliography 350
Acknowledgments 354
Index 357