New Jersey-based Principia Partners, which provides data processing solutions for structured finance and capital markets companies, launched a product that will help structured finance entities handle compliance reporting and accounting.
The latest incarnation of Principia Partners' structured finance platform, called Principia SFP, will benefit several businesses including ABCP conduits, securities arbitrage conduits and structured investment vehicles markets - by automating some of the most intensely manual tasks involved in compliance reporting. The company's Web site lists U.S. and Europe-based clients, including the New York Life Insurance Co., Rabobank International, Societe General and WestLB AG.
Principia's V5 product allows companies to manage the whole business themselves, while proving to rating agencies that they are running sound operations and can maintain their high ratings. Companies can track their assets, liabilities, derivative instruments and their internal operational controls. The product also allows them to ensure that they are meeting accounting compliance standards. Structured investment vehicles, for instance, hold onto long-term assets and issue commercial paper and medium-term notes. They have to be very market neutral, so they operate within a very tight band of interest rate sensitivity. Their underlying ABS assets must meet geographic and credit quality diversification standards. Principia's V5 helps them to track their operations to ensure that they continue to maintain their high credit ratings, said Doug Long, executive vice president of business strategy at Principia Partners.
"These companies are run by a small number of people who do everything," Long said. "We provide the software solution for them to manage the whole business themselves."
The product is expected to be particularly useful to credit derivative product companies (CDPCs). These companies act as credit default swap counterparties by providing protection on the super senior positions of CDOs. Aside from employing sophisticated modeling, professionals with a lot of expertise in credit swaps and heavy financial backing, CDPCs must also have a triple-A rating from a major rating agency. Principia Partners' product coincides with growing industry talk for the need to document processes stemming from the growing credit and risk management industry. With the credit swaps market increasing at a record pace and reaching $17 trillion in notional value at the end of 2005, CDPCs and other entities that deal with credit hands on, have boosted their presence in the asset securitization market.
CDPCs need to make sure that they track their cash flow payments; that they have enough capital to meet their counterparty liabilities; and it is also crucial that all of the information included on compliance reports is properly accounted. All of this documentation helps CDPCs meet rating agency compliance standards for their top ratings.
"[V5] is a broader product," Long said. "It represents the culmination of our work on structured credit over the last few years."
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