How asset-backed securities work in Indonesia: Rahmat Bastian of BT Partnership Law Firm provides a run-down of the asse
Topic 1International Financial Law ReviewHow asset-backed securities work in Indonesia: Rahmat Bastian of BT Partnership Law Firm provides a run-down of the asset-based financing regime in Indonesia; IndonesiaJuly 1, 2005Bastian, RahmatAsset-backed securities (ABS) are an asset-based financing in which the financing (given by the holder of the ABS when issued) is secured with debt securities and receivables (the assets) of an originator (the initial creditor, that is, a financial institution or corporation). These assets usually comprise securities (bonds, notes or commercial paper) and receivables (consumer loans, trade receivables or leases) that can be structured or repackaged into liquid and profitable securities in the form of ABS. Whenever the underlying assets fall under the category of non-liquid assets, the role of credit enhancement provider and existence of products such as financial instruments (letters of credit, insurance policies, interest rate guarantees, option or swap products) will be significant enough to improve portfolio quality and its rating by the rating agency. The role of a servicer, which is authorized by the SPV to monitor and manage the operation of claim recovery and, if necessary, select the most appropriate methods of legal action, is also no less significant.
