Enterprise asset securitization refers to a financial instrument that restructures assets that lack liquidity but can generate stable, predictable and independent cash flow, and uses them as basic assets to issue securities that can be circulated in the financial market.

according to the regulations on the management of asset securitization business of subsidiaries of securities companies and fund management companies (Announcement No.49 [214] of China Securities Regulatory Commission, hereinafter referred to as "Document No.49"), asset securitization business (ABS) refers to the business activities of issuing asset-backed securities with the cash flow generated by the underlying assets as repayment support, credit enhancement through structuring and other means.

"basic assets" refer to property rights or properties that conform to laws and regulations, have clear ownership, can generate independent and predictable cash flows and can be specified. The basic assets can be a single property right or property, or a combination of multiple property rights or properties.

subsidiaries of securities companies and fund management companies carry out asset securitization business by setting up special purpose vehicles. "Special purpose vehicles" (SPV) refer to special asset support plans specially set up by subsidiaries of securities companies and fund management companies for asset securitization business or other special purpose vehicles approved by China Securities Regulatory Commission.

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ABS has the following advantages compared with traditional financing methods:

1. It improves the liquidity of assets and the utilization rate of funds. The financier obtained the corresponding consideration when selling the basic assets, and realized the financing without increasing the debt and occupying the bank credit line.

By issuing ABS, the predictable and stable cash flow in the future will be converted into cash at one time, and the funds will be invested in the main business or other investments to obtain more income, thus improving the liquidity of assets and the utilization rate of funds.

2. The trading structure can be designed flexibly according to the needs. Traditional financing instruments (stock issuance and bond issuance) have many restrictions on the issuer, the scale of issuance (for example, the amount of bonds issued publicly should not exceed 4% of net assets) and the use of raised funds.

there is little room for the rights and obligations between the financier and the investor to be freely agreed by all parties. However, in ABS issuance, there are fewer restrictions on the financier, so the transaction structure can be designed flexibly according to the different needs of financiers and investors, and there is more room for freely agreeing on the rights and obligations of all parties.

3. The main credit is converted into asset credit, which reduces the financing cost. In traditional bond financing, bond repayment mainly depends on the credit status of the issuer. Without external credit enhancement, the credit rating of the issuer is equivalent to the debt rating. If the credit rating of the subject is not high, it may lead to the failure of issuance, and the introduction of external credit enhancement will lead to the increase of issuance cost.

ABS products that can completely achieve "real sale" and "bankruptcy isolation" cut off the relationship between the main credit and ABS securities. Even if the credit level of the issuer is poor, if the basic assets are of high quality, they can still get a higher product rating through institutional design, so that financing can be successfully realized and financing costs can be effectively reduced.

4. The issuance supervision process is simple, which improves the financing efficiency. Different from the approval system of stock issuance and bond issuance supervision, ABS issuance adopts the supervision mode of "confirmation of listing conditions of exchanges+filing of fund industry agreements". Whether it is confirmation of listing conditions of exchanges or filing of fund industry associations, the supervision process is simpler and more efficient than that of stock issuance or bond issuance.

normally, it takes 3-6 months for an ABS project to complete its listing from the time when an intermediary agency enters the site for due diligence. In the case that the basic assets are of high quality, there are precedents in asset types and transaction structure, and the professional level of intermediaries is high and the cooperation is good, the ABS issuance cycle may even be shorter, which undoubtedly provides an efficient and convenient financing channel for financiers.

Baidu Encyclopedia-Asset Securitization