Securitization of Mezzanine Capital in Germany

A recent trend in the German asset-backed securities (ABS) market is the securitization of subordinated loans and profit participation agreements (PPAs) granted to medium-sized enterprises (MEs). This paper provides an overview of this growing market and analyzes the benefits of such transactions for portfolio companies as well as for originators and potential investors. Simulations of 10 recent transactions indicate that despite the relatively low interest rates charged on obligors, originators and investors can earn attractive returns at fairly low risk. In particular, the junior tranches of these securitizations exhibit quite attractive risk-return profiles