CMA Final · Strategic Financial Management · Securitization
A pool of Rs 200 crore of loans is securitised and sold to an SPV at Rs 196 crore, and the originator provides a cash collateral of Rs 6 crore as credit enhancement. Ignoring other costs, what is the immediate cash inflow retained by the originator after funding the cash collateral?
The originator retains Rs 190 crore. It receives Rs 196 crore from selling the pool to the SPV but must set aside Rs 6 crore as cash collateral for credit enhancement, so net immediate cash is 196 minus 6, which is Rs 190 crore.
- ARs 190 croreCorrect
- BRs 196 crore
- CRs 202 crore
- DRs 194 crore
Explanation
Sale proceeds are Rs 196 crore. The originator must place Rs 6 crore as cash collateral, so net cash available is 196 - 6 = Rs 190 crore. Rs 196 crore ignores the collateral outflow.
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