Understand that this is similar to other types of securitisation, except that the bonds are backed by receivables from (loans to) the public sector / government, instead of the banks' other assets such as mortgage, car loans, credit cards etc. What are the benefits that are specific to this arrangement? Why don't the public sector entities borrow directly from the market? In fact, for the last two paragraphs in the section, I struggled to grasp the key message although I understand what they mean "literally". Can someone shed some light please, or explain in layman's terms?
I must admit that I did a fair amount of surfing to try to find out about these instruments, and there is not a lot out there. I decided in the end that they were like securitisation, but where the investor has a secondary claim against the issuing institution. So the asset cannot be removed from the local authority's balance sheet even though the future cashflows from the asset have been used to secure a securitisation bond. Best of both worlds for the investor, and worst of all worlds for the issuing institution. I am not sure why someone would choose to issue them, nor can I find any examples online of them being issued. (I appreciate this is not such a useful answer, but if anyone else has any experience of them, or finds something online??)
Communal bonds are bonds which have a claim on the issuing institution unlike a secured bond which has a claim on specific asset(s) if its a mortgage bond or a floating charge if its a claim on all assets. Communal bonds are suitable for institutions which do not have "balance sheets" but have underlying sources of revenue. Think government bodies and agencie, local authorities etc. The security of the bond is that a claim can be made on the institution in question rather a hard to place asset.
