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FAQ - Guidelines on the Offering of Asset-Backed Debt Securities (updated 12 September 2001)

Following the release of the Guidelines on the Offering of Asset-Backed Debt Securities (ABS Guidelines) on 11 April 2001, the Securities Commission (SC) will periodically issue responses to FAQs to clarify and facilitate better understanding among affected parties and the public in general in relation to securitisation transactions.
 

Special Purpose Vehicle (SPV) 1. What legal structure should the SPV take? 2. Can an SPV be incorporated in Labuan?   Approval Process 3. How long would the SC take to approve an ABS submission? 4. Is the Foreign Investment Committee?s (FIC?s) approval necessary for the transfer of all types of assets in a securitisation transaction?   The Originator 5. Under what circumstances would the SC approve a foreign Originator in a securitisation transaction?   Requirements for assets that may be securitised 6. Can assets in a securitisation transaction be foreign based? 7. The ABS Guidelines require assets to be transferred at fair value. How would the adviser ensure that the asset value is in fact ?fair?? 8. Are revolving structures permitted under the ABS Guidelines?   True Sale Requirement 9. Can the Originator have a buy-back arrangement on the underlying assets? 10. Would an Originator be permitted to hold subordinated debt in an ABS structure?   Servicer 11. The Guidelines stipulate that the Originator should not have control over the assets transferred to the SPV. Can the Originator be a servicer and still comply with this requirement?   Exchange Control Matters 12. Must any ABS issued be denominated in Malaysian Ringgit or can the ABS be issued to foreign investors in a foreign currency denomination? 13. Would funds, which are received by a non-resident controlled company as a result of the origination of an ABS issue, fall within the definition of ?credit facilities? and therefore be subject to the computation of 3:1 domestic debt to capital funds ratio for the purpose of exchange control notices? 14. ABS can be issued with assets purchased from residents or non-residents by special purposes vehicles (SPVs) which are residents or non-residents. As exchange control rules cover payments between residents and non-residents, what are some situations in which SPVs are freely allowed under exchange control rules to issue ABS.   Other matters 15. What other measures are being undertaken to develop the asset securitisation market in Malaysia? 16. Are there any restrictions imposed on institutions licensed under the Banking and Financial Institutions Act 1989 (?BAFIA?) in the structuring of a securitisation transaction? 17. Can the ABS be sold to a parent or subsidiary of the Originator, in or outside Malaysia? Would the ?true sale? requirement be met? 18. Can an Originator hold preference shares in an SPV? Would holding preference shares contravene the requirement that "an Originator must not hold any equity stake, directly or indirectly, in an SPV"?