Jayson Funke writes: >> Are offshore financial centers of particular importance for the processes of >> securitization, or did Sears set up its subsidiary company in the Bahamas >> (or at least somewhere in the Caribbean if I remember correctly) for some >> other reason?
That is not exactly what the article said. The marks were sold to a subsidiary, which then issued $1.8 billion of bonds to Sears' captive insurance subsidary in Bermuda. While the article is not explicit, I would bet that the subsidiary holding the marks and issuing the bonds is a US entity. Bermuda is one of the largest insurance markets in the world. I don't know why. Offshore financial centers are not important to securitization. Again, "securitization" is not the transfer of the assets to the subsidiary, but when the subidiary issues publicly traded securities secured by the assets. The bondholders are going to want their rights and remedies governed by a favorable legal system, and the US legal system is excellent for the exercise of creditor rights and remedies. I am not a project finance lawyer who does securitizations on a daily basis, but as a bankruptcy lawyer who occasionally deals with them, I have never seen a securitized transaction governed by any law other than the US. David Shemano
