A graduate of the University of Missouri, Seth Koppes serves as the CEO of Bancorp Services, LLC, where he assists large financial institutions and other Fortune 500 organizations in meeting their specific requirements. Seth Koppes addresses clients’ needs by developing innovative structured financial products.

Large organizations and banks leverage structured finance during financial crises or when looking to take advantage of scaling opportunities without access to sufficient credit. Structured finance is typically reserved for complex financial needs that necessitate massive financing. Two types of structured finance products are collateralized debt offerings (CBOs) and asset-backed securities.

Organizations issue collateralized debt offerings to access huge financing while transferring the risks of assets to other entities, the CBO investors. CBO involves bundling mortgages, loans, and other debt securities into tradable capital market debt instruments. Organizations, mostly banks, categorize and issue CBOs in tranches to investors. Tranche categories are junior tranche (with low priority of payment, higher risk, and a higher return offering), mezzanine tranche (with an intermediate level of credit risk and return), and senior tranche (with a high payment priority and a lower return offering).

Asset-backed securities (ABS) pool underlying debt instruments with predictable cash flow and convert them into tradable securities. The original asset holders, mostly lenders, transfer the credit risk associated with these assets to other entities that purchase ABS. One example of a sector where ABS is a common financing tool is the aerospace industry. Lenders in the aerospace industry typically issue ABS when looking to fund additional aircraft. ABS contracts in the aerospace industry often feature a liquidity facility, which helps mitigate the impact of a temporary cash flow shortfall on investors.