A securitization is a structured financial transaction in which loans, receivables, or other assets that generate cash flows are purchased and pooled by a special purpose vehicle (SPV), which pays the purchase price to the originator for the assets and issues asset-backed securities (ABS) to investors that are collateralized by the pooled assets.

The purpose of securitization is to convert illiquid assets into securities that can be sold to investors, while dispersing the risks and returns of these assets from the originator out into the marketplace. Any asset can be securitized if it generates regular cash flows that can be used to achieve timely distribution of proceeds to ABS holders.

Securitization transactions can be complex and, at first, challenging to understand. This Toolkit aggregates Practical Law resources designed to provide an introduction to and explanation of the basics of securitization and ABS transactions.