Auditors up the balance sheet scrutiny
Companies are receiving greater scrutiny from auditors over IFRS balance sheet accounting treatment of new and existing factoring facilities. It is not that the accounting rules have changed, but assessment and enforcement have become more deliberate. ...
Trade Receivables Securitisations
Securitisation of various cash flow assets began in the 1980s. Trade receivables, while not the fi rst asset class to be securitised, date back at least 25 years. Trade receivables securitisations allow companies to raise capital by selling, on a revolving basis, a selection of receivables to a legally separate, bankruptcy-remote special purpose entity (‘SPE’). The SPE, with the conveyance of the acquired receivables, can issue collateralised notes with the issuance proceeds fl owing back to the original selling company. ...
Working Capital – a Strategic Opportunity?
As any keen MBA student will relate, Michael Porter’s Five Forces* model can help management to determine the structure of their industry and provide a backdrop for strategy formulation. Understanding the structure of an industry is an important starting point for management in deciding whether to achieve competitive advantage via (i) differentiation or (ii) low cost. ...
Introduction to Receivable Securitization
While portfolio factoring and receivable securitization are both corporate funding constructs based on the true sale of a company’s trade accounts receivable, there are also significant differences between the two products. Unfortunately, many receivable finance practitioners have only a vague idea on how the other’s product actually works. This article is intended as a primer to help bridge the gap ...
Securitisation of Trade Receivables: An Alternative Source of Corporate Liquidity
Securitisation is a powerful technique for deriving flexible and efficient liquidity from a corporation’s trade accounts receivables. It can provide committed, revolving funding on a non recourse basis at a low ‘all-in’ cost, with the possibility for accounting sale treatment, term placement, or other useful features. Once the providence of large multinationals, advances in technology and the emergence of thirdparty specialists, like Finacity, have empowered corporates of many sizes and market sectors to take advantage of the benefits of securitisation. ...
Sharing the Business
As an arranger, structurer, administrator and reporting agent on trade receivables securitisations and other structured receivables finance products, we have been viewing the evolving trends and developments in this area of the market with particular interest. ...
Accounts Receivable Securitization
By various estimates, a tally of accounts receivable as reflected in the financial statements of U.S. companies would total approximately $10 trillion, with a comparable amount outstanding in Europe and more in the rest of the world. In order to bridge the typical timing gap of cash inflows and outflows, companies frequently seek funding from lenders, factors, and the capital markets (via pledges or sales of accounts receivable). Accounts receivable financing is a highly efficient means of satisfying many financial demands and it has been employed in various forms for centuries. In addition to the older methods of factoring and asset-based loans, accounts receivable have been securitized since the 1980s, with an estimate of approximately $60 billion outstanding in the U.S. ...
Making Trade Securitisation Work
While there has been much debate over securitisation in general, there is often very little attention paid to the actual process through which securities are created, and the operations involved in monitoring and maintaining those securities. ...
Funding Through the Use of Trade Receivable Securitization
A trade receivables securitization is a way for a seller to raise capital by selling certain trade receivable assets into a special purpose vehicle (SPV), on a revolving basis. This permits the SPV to raise capital by issuing notes or taking out a loan, using the trade receivable assets as collateral. The proceeds from the loan or note then flow back to the seller as purchase proceeds for the trade receivable assets. Such a transaction can typically garner a rating higher than seller’s own corporate credit, thereby giving the seller access to greater liquidity at a lower cost of funds. Other advantages may include trade credit insurance and off-balance treatment. Structures, operations, and overhead can vary considerably, and there is room for optimization, customization, and fine-tuning; so, it is important for a seller to choose its securitization partners and arrangements carefully ...
Los Beneficios de la Titulización de Cobros
Segun diversas estimaciones, la cartera de cuentas a cobrar, reflejada en los estados financieros de las empresas europeas, alcanzarra un total aproximado de siete billones de euros. La financiacion de la empresa mediante la prenda, venta o cesion de sus derechos de cobro ha sido un instrumento eficiente para satisfacer sus necesidades financieras y ampliamente utilizado durante siglos. ...
Creative Thinking and Elbow Grease
In January, the Financial Accounting Standards Board (FASB) released FIN 46, an interpretation of Accounting Research Bulletin No. 51 (ARB 51), which addresses consolidation of so-called variable interest entities. The impetus was primarily Enron and its accounting abuses with respect to special purpose entities (SPEs). ...
Breaking the Funding Barrier
Account receivables financing is a highly efficient means of satisfying many financial demands and has been employed in various forms for centuries. Notwithstanding the history and breadth of funding techniques, receivables are generally inefficiently funded despite their characteristics as one of the most creditworthy and liquid assets on a balance sheet. ...