A securitization transaction could be defined as the act of converting an asset into marketable securities, usually in order to obtain cash.

The concept is based on international market practices involving financial transactions in which a company pools assets, mostly accounts receivable, and then transfers them to a special purpose entity or vehicle, which finances the acquisition by issuing bonds. values.

Securitization is often an enhancement to the financing of existing business operations.

Securitization transactions are very popular with mortgage-backed securities; today there are more types of non-financial assets and future cash flows. The following are examples of assets that can generally be insured.

Aircraft leases, auto loans (prime and subprime), auto leases, boat loans, credit card receivables, equipment leases, home equity loans, manufactured home contracts, shipping containers, and boat leases chassis, mortgages (residential and commercial). The rest are railcar leases, real estate, RV loans, royalty streams, stranded utility costs, trade receivables, railcar leases, truck loans, oil exploration and other future receivables.

The Ghana School Financing Facility is Ghana’s first official “securitization transaction”. This is a structured risk-sharing facility that covers the initial portfolio of long-term local currency loans from a local partner bank for schools. The goal was to help local banks learn how to earn money and also contribute to the development of the country.

The International Finance Corporation (IFC) provides advisory services to banks to process and monitor school loans, while helping local schools with management training and strategic planning to enable schools to operate more like sustainable businesses. This helped improve their credit risk profile with banks.

IFC established a $2.1 million joint venture facility with Ghana’s Trust Bank Ltd, supplemented by advisory services from IFC and the African Development Bank for the Trust Bank and its client schools.

The Trust Bank is expected to increase its size and funding to private schools, implement a cost effective alternative funding mechanism for schools. It will also give the bank an opportunity to prepare for the securitization transaction when the market is ready.

The following is an industry perspective for a potential securitization transaction in Ghana.

Ghana has a modest upstream oil industry with one sedimentary basin onshore and five offshore. The main drive behind the oil and gas industry in Ghana is the need to reduce the country’s reliance on hydroelectricity.

The authorities usually aim for a “primary” budget surplus to reduce the overall budget deficit and domestic debt. Oil subsidies were cut, but public sector wages were increased. However, the recent computerization of customs should increase tax and public sector revenue and contain the overall budget deficit.

A series of initiatives to boost cassava, textiles and palm oil should increase non-traditional exports, while high cocoa and gold prices should lead to higher export earnings. High oil prices continue to hurt Ghana. Oil imports are estimated to account for more than 20% of the total import bill, leaving the economy vulnerable to large price swings. Large transfers, IFI credits, donor support, and generous Paris Club debt relief have pushed external current account deficits to more manageable levels.

Schemes and reforms, such as increasing low electricity rates towards international levels. Since the mid-1980s, the Government of Ghana has been financing projects using small levies on petroleum products. The US$250,000 collected annually is entered into an Energy Fund and used to promote renewable energy and energy efficiency projects.

In Ghana, oil operations are governed by the Petroleum Act 1984, which empowers GNPC to operate on the entire open surface of the country on its own or in association with foreign partners.

Smaller companies find it easier to explore in Ghana than in some of its West African neighbors. This is due in part to advantageous contract terms that include the following elements: No upfront payments such as signing or production bonuses; negotiable royalties and income tax (currently at 35%); no limit on cost recovery, low rental payments, no restrictions on the repatriation of funds, and no import duties on exploration and production equipment and materials…

With securitization, the GNPC can securitize its rights to receive payments for crude sold to other oil refineries. Agreements representing those receivables should be worded in such a way that non-transferability clauses in favor of refineries, for example, are beneficial, but should not be applied, as doing so prevents the securitization from proceeding. gold.

Reference:

1. Africa -Ghana organizing in the informal sector (online) (accessed April 29, 2006)

2. Ghana Chamber of Commerce Newsletter

3. Ghana Self-Assessment (online) available at ghanaembassy.dk/tax/asp.cata.org.my/Ghana1 accessed 21/06/07

4. Private Sector Development Strategy for Ghana (online) available at dfid.gov.uk/pubs/files/ghana/priv-sect-dev-strategy/ accessed 21/06/07

5. Annual Report of the Securities Exchange Commission (online) available at secghana.org/publications/annualreport/ accessed 06/21/07