Debt Securitization

Debt Securitization By securitizing its debt, a company can transform its credit assets into liquid and marketable instruments. This obviates the necessity of selling its assets in the event of a severe cash crunch. For example, a bank has a large auto – loan account or auto – loans receivable. By securitizing if the bank can make it a money market instrument. Buyers of these would expect a credit rating for these instruments, but if the rating is high, there should be not difficulty in selling them to meet the cash crunch. See CHERRY PICKING.

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