asset-backed security

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Asset-backed security

Asset-Backed Security

A debt security collateralized by some receivables on some credit sale. Common examples of this collateral include receivables on credit cards, automotive loans, and similar assets. Returns on these securities come from customers' payments on their credit cards and other loans that may be backing the securities. Banks and companies package and sell their receivables to investors in order to reduce the risk of loan defaults. See also: Mortgage-backed security.

asset-backed security

A debt security collateralized by specific assets. Although the term applies to any debt backed by identified assets, it generally refers to securities backed by short-term collateral such as credit-card receivables, car loans, and home-equity loans. Because even the most financially strapped companies can hold valuable assets, it is possible for the credit quality of asset-backed securities to be substantially better than the general credit of the company issuing the securities.
References in periodicals archive ?
Auto sector bonds comprise about 60 percent of all asset-backed bonds sold this year.
AESOP has closed an offering of USD700m of asset-backed bonds with a weighted average interest rate of 3.
US sub-prime loans effectively poisoned asset-backed bonds as struggling American borrowers defaulted on their repayments, which then triggered the crippling global credit squeeze and subsequent banking meltdown.
The SEC's staff agreed late Thursday to temporarily suspend a rule requiring that deal documents for asset-backed bonds include credit agencies' ratings of the bonds.
Avis Budget Rental Car Funding LLC (AESOP), a subsidiary of Avis Budget Group, Incorporated (Avis) (NYSE: CAR), has completed a multi-tranche offering of around USD580m of three-year and five-year asset-backed bonds.
Although uncommon in most municipal deals, different ratings based on maturity are common with asset-backed bonds, such as home equity debt.
The European Central Bank (ECB) is in early discussions to find ways to make loans against approxiamtely EUR1tn of asset-backed bonds more attractive to financial institutions, according to reliable sources quoted by Reuters.
The European Central Bank (ECB) is said to be considering a plan to make it cheaper for financial institutions to borrow against asset-backed bonds.
The bank sold the TALF deal before the monthly loan application deadline for the Fed's cheap funds to acquire asset-backed bonds.