Restructured asset is an asset that has been modified in some way to improve its credit quality. In the context of securitisation, restructured assets are often used to reduce the risk of a securitisation.
There are a number of different ways that an asset can be restructured, including:
- Extending the maturity of the asset: This can reduce the risk of default by giving the borrower more time to repay the debt.
- Converting the asset to a floating-rate instrument: This can reduce the risk of default by linking the interest payments on the asset to market interest rates.
- Increasing the collateral backing the asset: This can reduce the risk of default by providing the lender with more security in the event of a default.
Restructured assets can be used in a number of different securitisation structures, including:
- Mortgage-backed securities: Restructured mortgages can be used to create mortgage-backed securities with a lower risk profile.
- Collateralized debt obligations: Restructured debt securities can be used to create collateralized debt obligations with a lower risk profile.
Restructured assets can be an attractive investment for investors who are looking for a lower-risk investment. However, it is important to understand the risks associated with investing in restructured assets before making an investment.