Expert answer:risks for investors based on the case

Solved by verified expert:please write about 1200 words for answer question 5 and 6The requirements are highlighted in word document. The case is in pdf document. THE MOST IMPORTANT THING IS THAT ANSWERING THESE TWO QUESTIONS AND ANALYSING THESE RISKS MUST BE BASED ON THE CASE AND CLOSELY RELATED TO THE CASE.
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groupassignmentinformationsheet2.docx

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Viveracqua Hydrobond 1
The main objective of this case is to analyse the issues arising from an asset-based securitization
whereby eight Italian water utilities by-passed the banks through self-financing on the capital market.
So your perspective for the report is a fixed income investors deciding to purchase the ABSs and
analysing the risks and opportunities linked with the transaction.
On 29 July 2014, eight companies belonging to the Vivearacqua Consortium (an ensemble of water
utilities mostly operating in Veneto, one of the most industrialized region in Italy) issued on a crosscollateralised basis €150 million worth of minibond. These securities were fully subscribed by the
newly-created special purpose vehicle called Viveracque Hydrobond 1. This transaction is the first
time Italian small and medium-sized enterprises have ever accessed the capital markets through
securitisation without the help of a bank acting as an intermediary. The news report on this case can
be found at:
http://www.reuters.com/article/idUSL6N0PX50520140722
The whole transaction can be broken down into two phases:
1. Issuing minibonds by the eight water utilities
2. Issuing the ABSs by Viveracque Hydrobond 1
You are recommended to read and understand the whole transaction before attempting to answer
questions required. Pay attention to some key factors, for example, the detailed structure of two
phases (Section 2.1, 2.2), the pricing model (Section 2.3) and other main difficulties and complexities
involved in the structure of the deal. The purpose is to assess risk and opportunities arising from a
real-life example of the securitisation. And additionally you can elaborate on the attractiveness of
this type of transaction and its future potential.
You should prepare a report with a structure including background, summary of the deal, analysis
and conclusion. Issues below (not in a particular order here) should be addressed in various parts of
your report appropriatly to your argument.
1.
2.
3.
4.
5.
What are the main benefits/risks to the eight water utilities to raise capital by this approach?
Please discuss the role of each parties in the deal, see section 3.
Outline cash flows for both minibonds and ABSs.
Evaluate two pricing models.
What are the specific risks for investors for minibonds?
1. default risk (page8 in the case document )
2.risk of information asymmetry (page 8 in the case document)
3. liqudity risk(page 6 in the case document)
4. interest rate risk and inflation risk（you can analyse these two risk as well cause it’s
common for each bond）
6. What are the major risks for an institutional investor considering investing in Viveracqua
Hydrobond 1?（page 20 in the case document）
1
Please write about 1200words in report style.
The most important thing is that anwsering these two questions and analysing these risks must be
based on the case and closely related to the case.
A distinction-mark report should:
•
•
•
•
•
Outline and elaborate on the key facts of the structure
Identify and evaluate the risk and advantages across two phases of the structure (including
pricing)
Present the argument in a logic and coherent order to the perspective of investors
Discuss and generalize on the future potential of securitisation
Write well with no grammatical and spelling errors
There are no particular requirements on the number of references and external resources. But your
argument should be based on facts with proper referencing. Copy and paste directly from web
resources will be dealt with as a plagiarism behaviour. The total report should be within 15 pages
with single-line spacing and font size 12. Executive summary is optional.
2
Viveracqua Hydrobond 1
The main objective of this case is to analyse the issues arising from an asset-based securitization
whereby eight Italian water utilities by-passed the banks through self-financing on the capital market.
So your perspective for the report is a fixed income investors deciding to purchase the ABSs and
analysing the risks and opportunities linked with the transaction.
On 29 July 2014, eight companies belonging to the Vivearacqua Consortium (an ensemble of water
utilities mostly operating in Veneto, one of the most industrialized region in Italy) issued on a crosscollateralised basis €150 million worth of minibond. These securities were fully subscribed by the
newly-created special purpose vehicle called Viveracque Hydrobond 1. This transaction is the first
time Italian small and medium-sized enterprises have ever accessed the capital markets through
securitisation without the help of a bank acting as an intermediary. The news report on this case can
be found at:
http://www.reuters.com/article/idUSL6N0PX50520140722
The whole transaction can be broken down into two phases:
1. Issuing minibonds by the eight water utilities
2. Issuing the ABSs by Viveracque Hydrobond 1
You are recommended to read and understand the whole transaction before attempting to answer
questions required. Pay attention to some key factors, for example, the detailed structure of two
phases (Section 2.1, 2.2), the pricing model (Section 2.3) and other main difficulties and complexities
involved in the structure of the deal. The purpose is to assess risk and opportunities arising from a
real-life example of the securitisation. And additionally you can elaborate on the attractiveness of
this type of transaction and its future potential.
You should prepare a report with a structure including background, summary of the deal, analysis
and conclusion. Issues below (not in a particular order here) should be addressed in various parts of
your report appropriatly to your argument.
1.
2.
3.
4.
5.
What are the main benefits/risks to the eight water utilities to raise capital by this approach?
Please discuss the role of each parties in the deal, see section 3.
Outline cash flows for both minibonds and ABSs.
Evaluate two pricing models.
What are the specific risks for investors for minibonds?
1. default risk (page8 in the case document )
2.risk of information asymmetry (page 8 in the case document)
3. liqudity risk(page 6 in the case document)
4. interest rate risk and inflation risk（you can analyse these two risk as well cause it’s
common for each bond）
6. What are the major risks for an institutional investor considering investing in Viveracqua
Hydrobond 1?（page 20 in the case document）
1
Please write about 1200words in report style.
The most important thing is that anwsering these two questions and analysing these risks must be
based on the case and closely related to the case.
A distinction-mark report should:
•
•
•
•
•
Outline and elaborate on the key facts of the structure
Identify and evaluate the risk and advantages across two phases of the structure (including
pricing)
Present the argument in a logic and coherent order to the perspective of investors
Discuss and generalize on the future potential of securitisation
Write well with no grammatical and spelling errors
There are no particular requirements on the number of references and external resources. But your
argument should be based on facts with proper referencing. Copy and paste directly from web
resources will be dealt with as a plagiarism behaviour. The total report should be within 15 pages
with single-line spacing and font size 12. Executive summary is optional.
2
…
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