An obligor is the borrower or debtor who is liable to make payments on the underlying assets. The obligor is typically the borrower under a loan agreement, but it can also be the seller of a receivable or the lessee under a lease agreement.
The obligor is an important part of the securitisation process because they are ultimately responsible for the performance of the securitised product. If the obligor defaults on their payments, the value of the securitised product may be reduced, and investors may lose money.
Some of the applications of obligors in securitisation include:
- Transferring credit risk: Securitisation allows investors to transfer the credit risk associated with the obligor to the securitised product. This means that investors are not directly exposed to the credit risk of the obligor, and they only lose money if the obligor defaults on their payments.
- Providing liquidity: Securitisation can provide liquidity to the market by creating a secondary market for the underlying assets. This means that investors can sell their securitised products if they need to, and they are not forced to hold them until the maturity date.
- Raising capital: Securitisation can be used to raise capital for businesses and other entities. This is because the securitised product can be sold to investors, who are essentially lending money to the business or entity.
Overall, obligors are an important part of the securitisation process and can help to transfer credit risk, provide liquidity, and raise capital.
Here are some examples of obligors in securitisation transactions:
- A borrower under a loan agreement
- The seller of a receivable
- The lessee under a lease agreement
- A government entity
- A corporation
- A partnership
- A trust
The obligor is typically identified in the securitisation documentation. This documentation will also specify the terms of the obligor's obligations, such as the amount of the payments that they are required to make and the timing of those payments.