The Role of Investment Banks in the Securitization Process

Russian Securitization ForumNew York, September 2007

Table of Content

1. Evolution of Securitization in LatAm vs. EMEA

2. Asset-Backed Securities from the Investment Banker Perspective

3. Benefits to Clients (Issuers)

4. Securitization Transaction Participants

Section 1

1. Evolution of Securitization in the Emerging Markets

2. Asset-Backed Securities from the Investment Banker Perspective

3. Benefits to Clients (Issuers)

4. Securitization Transaction Participants

Evolution of LatAm Market Securitization

Future Flow Beginning. In the beginning, the structured finance market was dominated by future flow transactions secured by assets denominated in foreign currencies. Given the relatively low ratings of most Emerging Market sovereigns, this form of financing was only available to the biggest, most creditworthy originators within each country. The main assets securitized in this fashion were:– receivables backed by future exports– Financial future flows generated by credit card vouchers or payment rights

Growth of Local Markets. As the Latin American structure finance market has progressed, we have witnessed the emergence and increased issuance of existing asset securitizations in local currencies placed within their domestic capital markets and, more recently, in the international capital markets. This has allowed less creditworthy originators to achieve relatively low-cost financing through securitization

Evolution of Emerging Market SecuritizationLatin America (LatAm)

2004 Latin American Securitization(total issuance US$10.9 billion)

2005 Latin American Securitization(total issuance US$14.5 billion)

2006 Latin American Securitization(total issuance US$15.3 billion)

Source: Moody‘s Investors Service

Evolution of Emerging Market SecuritizationEurope, Middle East and Africa (EMEA)

2006 EMEA Securitization(total issuance* US$10.9 billion)

1st Half 2007 EMEA Securitization(total issuance* US$5.8 billion)

*South Africa and Israel have been excluded due to their relatively more developed structured finance market

Source: Moody‘s Investors Service

The EMEA Structured Transaction Market

1st Half 2007 Securitization by Country(total issuance* US$5.8 billion)

1st half 2007 Securitization by Asset Type(total issuance* US$5.8 billion)

*South Africa and Israel have been excluded due to their relatively more developed structured finance market

Source: Moody‘s Investors Service

EMEA Market 1st Half 2007 Structured Transactions

The chart below displays the volume of EMEA Transactions in the first half of 2007(The chart includes both South Africa and Israel)

Issuance Volume ($USD billions)

The Latin American Domestic Market

2006 Domestic Securitization by Country(total issuance US$12.2 billion)

2006 Domestic Securitization by Asset Type(total issuance US$12.2 billion)

Latin American Securitization

The below chart displays the Annual Latin America Securitization from 2000-2006

Volume ($USD billions)

Investor Base

Local Markets. As existing asset securitizations have taken a firm hold on the Emerging Market securitization market, the local capital markets have grown and become more sophisticated

International Markets. Issuers from Emerging Market Countries have begun to seek international investors in their securitizations.

Recent Development. More recently, Institutional investors have been buying senior tranche of local deals in local currency.

Section 2

1. Evolution of Securitization in the Emerging Markets

2. Asset-Backed Securities from the Investment Banker Perspective

3. Benefits to Clients (Issuers)

4. Securitization Transaction Participants

What makes assets securitizable?

While new asset classes continue to emerge and the criteria to determine securitization suitability becomes more complex, the basic principles to assess whether or not an asset can be securitized remain constant:– Known loss rates: In order to accurately assess a pool’s credit risk, there must be historical

information on the loss rate of the type of asset being securitized– Predictable cashflow: Assets securitized to date have benefited from long histories of cashflow

driven pool analysis allowing the rating agencies to model cashflows with a reasonable degree of confidence

– Collateral value: Credit quality is impacted not only by the obligor credit quality and historical loss rates but also the realizable value of the underlying collateral. The ability to repossess defaulted collateral and resell the collateral quickly with consistent historical recovery rates is valuable when predicting cashflows

– Diversity: Pool assets are less risky if they are diverse (i.e., an obligor pool living in the same region dependant on a single industry would be riskier than a diverse pool representing a cross section of the economy)

– Security interest transfer: Security interest in collateral is transferred into the trust for the sole benefit of the note holders

– Supporting information systems infrastructure: In order to execute a securitization, an issuer will develop infrastructure to designate those assets sold, track performance, and provide data on the securitized pool

Asset Backed SecuritiesUnderwriter’s Role

DB’s ABS bankers would work with the issuer to:

prepare and format performance data to meet rating agency requirements

arrange and participate in initial meetings between the issuer and the surety providers

prepare comprehensive presentation materials for the surety providers

arrange and participate in initial meetings between the issuer and the rating agencies

prepare comprehensive rating agency presentation materials

perform the cashflow modeling analysis

Asset Backed SecuritiesUnderwriter’s Role (continued)

DB’s ABS bankers would work with the issuer to:

negotiate credit enhancement and bond structure requirements

work with counsel to draft the transaction and offering documents

coordinate a targeted investor roadshow to market the transaction

prepare investor roadshow presentation materials

manage the marketing and syndication of the transaction

assist the issuer with preparation of the investor reporting materials including a dedicated ABS website

Rating Agency Negotiation

Achieving the highest possible investment grade issuance level is likely to entail some degree of flexibility during the negotiating process, particularly in regard to structural changes.

Extensive experience in originating and servicing the accounts warrants favorable enhancement levels on the part of the Rating Agencies.

Choosing a lead manager with extensive experience in managing the rating agency process is very important for first time issuers.

Credit enhancement is utilized to achieve higher ratings on securities issued. Typically, senior securities are structured to achieve triple-A ratings and subordinate securities are structured to achieve single-A or triple-B ratings.

Transactions may be enhanced internally or via third parties:

Internal Enhancement External Enhancement

Overcollateralization Surety Policy Subordination Reinsurance Reserve Account Excess Spread

Letter of Credit

Section 3

1. Evolution of Securitization in the Emerging Markets

2. Asset-Backed Securities from the Investment Banker Perspective

3. Benefits to Clients (Issuers)

4. Securitization Transaction Participants

Benefits of Securitization

Benefit Description

Efficient Meansof Funding

Provides access to triple-A funding regardless of the credit rating of the seller/servicer

Offers a cost competitive source of funds relative to many traditional debt alternatives

Demonstrates an alternative source of funding assets to the rating agencies and the equity market

Provides perfect match funding for the assets

Values asset portfolios at market value as opposed to book value

Re-capitalization

Purposes

Often reduces capital requirements, enabling capital to be redeployed to fuel growth

Achieves greater borrowing capacity through the higher leverage obtained in selling assets through debt financing

Off-balance sheet financing may provide borrowing flexibility

Increases balance sheet liquidity, facilitating future originations

RiskManagement

Generates risk-free fee income from continued servicing of assets

Allows for the transfer of credit risk in the portfolio

Provides match funding for amortizing assets as principal payments on the assets amortize the outstanding securities

Diversifies funding sources

Benefits of Securitization (continued)

Benefit Description

OperatingEfficiencies

Facilitates asset and capital management – the issuer would be positioned to either sell or retain assets

Allows for expansion of servicing volume at the margin thereby reducing per cost of servicing

Provides increased control over asset pricing as a result of the market discipline provided by a securitization program

RatingAgencies

Demonstrates ability to access alternative liquidity

May provide for capital preservation

Initiates rating agency discussions beyond the corporate ratings group

Management ofFinancial

Statements

May constitute a sale of assets for financial reporting purposes

Facilitates acceleration of income, if strategically desired

May improve net interest margin of on-balance sheet assets

Improves financial ratios (i.e., ROA, ROE ) related to balance sheet assets

May constitute debt treatment of receivables financing for tax purposes

Section 4

1. Evolution of Securitization in the Emerging Markets

2. Asset-Backed Securities from the Investment Banker Perspective

3. Benefits to Clients (Issuers)

4. Securitization Transaction Participants

Securitization Transaction ParticipantsManaging the Transaction

Investment Banker

Issuer / Originator

Investors

ObligorsRating

Agencies

Counsel

Trustee

Guarantor

Accountant

Contact Information

Brigitte PoschDirector

Head of Latin American Securitization

Deutsche Bank Securities Inc.

Securitized Products Group

Tel: (212) 250-4551

Email: brigitte.posch@db.com