Structured investment vehicle

As Conduit refinancing structure is referred to, in which purchased by a special purpose entity securities such as ABS or CDO or other requirements such as loans or receivables from deliveries and services of external companies valued once or revolving basis and on the issuance of commercial paper be refinanced in common international currencies. These money market securities may include securities with short maturity ( asset-backed commercial paper, ABCP ), or securities with intermediate-term ( Medium Term Notes, MTNs) to be.

In early October 2006, the volume of bonds issued by ABCP conduits 993.1 billion U.S. dollars.

Structure

In a Conduit mostly different programs from different customers are bundled. For a pool of identical or similar assets is summarized by each client whose history and value is examined in the context of structuring. Based on the failure history and the related asset quality, a percentage of the total amount of these assets are refinanced by money market securities. The remaining discount is thus referred to as a backup.

The arranging bank additionally provides credit- enhancing facilities as part of the ABCP program are available, including in the form of liquidity lines, letters of credit or subordinated loans. The height of these facilities is usually determined by the rating agencies in order to achieve the desired rating of the issued money market securities. The facilities are usually taken for short-term sales problems of the CPs in the money market or short-term uncollectibility of receivables.

Conduits German banks during the subprime crisis of 2007

The subprime crisis in the U.S. and the sudden illiquidity in the ABCP securities and asset-backed securities brought in 2007, the two banks IKB German Industrial Bank and Sachsen LB in life-threatening crises, because they could not refinance in the money market its purchased receivables.