ABSTRACT
Finance for a particular asset may be on better terms for a number of different
reasons, depending on the nature of the assets and the characteristics of the
company which owns those assets.
Examples of why finance may be on better terms:
a) a company has a variety of liabilities, and the credit rating of a particular
class of assets may be better than that of the company itself (ie: taking into
account all that company’s liabilities), and
b) if a company is a financial institution, which is obliged to maintain regulatory
capital for the loans on its balance sheet, the cost of that capital is likely to
be higher than the cost of capital to another entity such as an orphaned
special purpose vehicle company established as a ‘purchaser’ for the loans.
