Secured creditors are creditors who have a security interest in an asset.
- In the context of securitisation, the asset is typically a pool of loans.
Secured creditors have a priority claim on the asset in the event of a default.
This means that they are more likely to be repaid than unsecured creditors.
Here are some applications of secured creditors in securitisation:
- To reduce risk: Secured creditors can be used by securitisation issuers to reduce the risk of their securities. This is because secured creditors have a priority claim on the assets, which means that they are more likely to be repaid in the event of a default.
- To increase liquidity: Secured creditors can be used by securitisation issuers to increase the liquidity of their securities. This is because secured creditors are more likely to be willing to buy and sell the securities, which makes them more liquid.
- To attract investors: Secured creditors can be used by securitisation issuers to attract investors. This is because some investors prefer to invest in securities that are backed by secured creditors, as they are considered to be lower risk.