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Question:

Asset-backed securities (ABS) may have a higher credit rating than the seller’s corporate bonds because:

A the special purpose vehicle is a separate entity.
explanation

The SPV in a securitization is a separate legal entity and thereby bankruptcy-remote from the seller, which means the sellers creditors do not have a claim against the pool of assets underlying an ABS. As a result, the ABS may have a higher credit rating than the sellers corporate bonds.

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