Credit Enhancement

Credit Enhancement
A method whereby a company attempts to improve its debt or credit worthiness. Through credit enhancement, the lender is provided with reassurance that the borrower will honor the obligation through additional collateral, insurance, or a third party guarantee. Credit enhancement reduces credit/default risk of a debt, thereby increasing the overall credit rating and lowering interest rates.

Credit enhancement is used to obtain better terms for an outstanding debt. Securitization, posting collateral and obtaining external credit enhancement such as a letter of credit are some basic forms of credit enhancement. Firms may also increase cash reserves or take other internal measures to uphold superior solvency ratios.

Investment dictionary. . 2012.

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  • Credit Enhancement — ist ein wesentlicher Bestandteil einer Verbriefungstransaktion und wird meist von Ratingagenturen ermittelt, um das Rating eines forderungsbesicherten Wertpapiers zu ermitteln. Es gibt unterschiedliche Arten von Credit Enhancements. Generell wird …   Deutsch Wikipedia

  • credit enhancement — International The use of various finance techniques to improve the creditworthiness of a security, as indicated by a credit rating. A security can be credit enhanced by reducing the probability of default by the issuer. securitisation structures… …   Law dictionary

  • Credit enhancement — Securities Securities Bond Stock Investment fund Derivative Structured finance Agency security …   Wikipedia

  • credit enhancement — A measure that alters the structure of a security in a way that reduces its credit risk. Credit enhancement may take the form of a letter of credit issued to back securities. For mortgage backed and asset backed securities, credit enhancement may …   Financial and business terms

  • Credit enhancement — Purchase of the financial guarantee of a large insurance company to raise funds. The New York Times Financial Glossary …   Financial and business terms

  • Credit Enhancement — (механизм повышения кредитного качества) инструмент или механизм, который позволяет повысить кредитное качество денежного потока от одного или более активов; элементы структуры в секьюритизации, призванные обеспечить защиту инвесторов от потерь… …   Ипотека. Словарь терминов

  • credit rating — n. A number calculated by examining a person’s assets, liabilities, and financial history that tells a lender how likely that person is to pay back a loan. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy… …   Law dictionary

  • Credit derivative — In finance, a credit derivative is a securitized derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset. In this way, the credit risk is on an entity other than the counterparties to the… …   Wikipedia

  • External Credit Enhancement — (внешний механизм повышения кредитного качества) кредитная поддержка сделки, предоставленная высоконадежной третьей стороной …   Ипотека. Словарь терминов

  • Internal Credit Enhancement — (внутренний механизм повышения кредитного качества) структурные механизмы или механизмы, являющиеся частью сделки секьюритизации, позволяющие повысить кредитное качество старших траншей выпускаемых ценных бумаг, обычно путем перенаправления… …   Ипотека. Словарь терминов

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