3.7.5 Asset Securitization

An asset securitization involves a public agency selling either assets expected to generate future revenues, such as tax or other receivables, or the right to receive a stream of payments, such as litigation settlement payments payable over time. The assets are sold to a special purpose entity that issues debt payable from and secured by the assets and applies the proceeds of the debt to pay the purchase price of the assets to the public agency. Asset securitizations are rare and highly complex transactions.