Trade receivables securitisation is the sale of a company’s receivables on a non-recourse, true sale, basis to a bankruptcy remote special purpose vehicle (SPV). The facility is undisclosed and the seller maintains its core relationship with its customers, continuing to collect the receivables directly. The SPV funds the purchase of the receivables by issuing a senior note to third party investors.
The advance rate calculation considers a number of factors including the structure, agreed eligibility criteria, historical performance of the receivables, and debtor concentrations to calculate the specific rating. Exclusions from the portfolio may include underlying contracts that prohibit the sale of the receivables and certain jurisdictions or currencies that are deemed to be excluded by the underlying investor. Other elements of the calculation include establishing reserves which encompass dynamic losses, dilutions, interest rate, yield and servicing, with typical advance rates on portfolios reaching between 80-90%.
Demica’s advanced packing algorithm optimises the portfolio of receivables by iterating the combination of different eligibility criteria, concentrations and exclusions, to maximise the amount advanced under the securitisation while still meeting the funder’s credit model. Our highly flexible technology platform and rules engine determines which receivables are eligible for funding, provides straight through processing on transaction reporting and funding calculations, and enables us to provide warm back up servicing when required.
Demica has over 15 years’ experience in establishing and managing Receivables Finance solutions in various formats. Trade Receivables securitisations can be funded by our clients’ relationship banks as well as a wide range of Demica’s Investor Partners, providing flexible funding at the lowest cost of capital.
“Demica’s technology is very reliable and has no problem efficiently handling high volumes of diverse and complex invoices. They have been an excellent partner to Flextronics and we wouldn’t hesitate to recommend them.”
“Demica helped us to capitalise on our trade debt assets to gain access to a relatively low cost, low volatile source of finance, with greatly advantageous rewards for ISS.”
Senior Director - Working Capital Solutions