Assessing the political risk when sovereigns meet structured finance

S&P managing director examines the role sovereign entities play in structured finance transactions.

Although structured finance transactions that involve sovereigns have been around for many years, in 2005 Standard Poor's has seen a flurry of such transactions in Europe and the Middle East. It is probably too early to tell whether this reflects a deep trend or is merely a coincidence.

However, this is an opportune time to look at the roles that sovereign entities play in structured finance transactions. Whichever the role, sovereigns bring with them a specific political risk not present when the sovereign's role is filled by a corporation, and the presence of this risk requires special analytical considerations.

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