Securitization For Corporates
For corporates that have seen their credit rating downgraded as a result of mounting financial pressure or a leveraged buyout (LBO), a trade receivables securitization (asset based lending) offers an excellent alternative source of funding. A trade receivables securitization deal allows corporates to receive AA- or AAA-rated standard trade receivables finance, although the company’s actual rating may be below that, since this form of debt is rated according to the credit quality of the debtors, and not of the issuer. This higher rated debt can reduce a corporate’s cost of funds by between 100 and 200 basis points.
Trade receivables securitization offers a corporate an attractive cost of funds and reduced interest costs.
Trade receivables securitization is a committed-term financing with a soft amortisation profile.
Engaging in a trade receivables securitization transaction enables a corporate to diversify their funding sources.
A trade receivables securitization is a highly flexible receivables financing source that can "breathe" with the business.
Trade receivables securitization and asset based lending offers a corporate return on equity (ROE) benefits from lower funding costs thus reducing the working capital investment requirement.
A trade receivables securitization transaction may be structured to survive a change of control of the company.
Securitization For Private Equity Sponsors
Increasingly, private equity sponsors are turning to trade receivables securitization (a form of asset based lending) in post leverage buyouts (LBO) companies to control both the level of borrowing and associated interest costs. Trade receivables securitization and receivables financing is also being utilised as a method of providing higher levels of working capital to develop value in buy-out companies. Using the proceeds of a trade receivables securitization to push out debt repayment schedules brings a valuable reduction in amortisation pressure, transforming the post-LBO balance sheet of the corporate.
Raising capital through a trade receivables securitization diversifies the sources of funding available through the medium of receivables financing
Engaging in a trade receivables securitization transaction will significantly reduce the amount of interest payable on outstanding loans
The option to securitize trade receivables and the sale of receivables will positively impact debt amortisation schedules
In the example above, the weighted average cost of debt is reduced by 1.32% as a result of the trade receivable securitization and the changes in the corporate debt structure.
Download the full receivables financing report (pdf) on the benefits of trade receivables securitization and asset based lending to Private Equity Firms.
Securitization For Investment Banks
Over a number of years, Demica has built solid partnerships and relationships with the world's leading financial institutions. As market leaders in trade receivables securitization (a form of asset based lending) , our partners choose to work with us, knowing that our trade receivables securitization expertise and ASP technology will accelerate deal execution and meet the stringent time and reporting requirements to satisfy all parties on each transaction.
Reduces the complexity and administrative burden associated with sale of receivables and securitization transactions
Receivables financing deploys flexible, cost effective, ASP technology that integrates with client/seller systems
Accelerates deal execution through invoice-by-invoice tracking and complete automation of the sale of receivables process
Mitigates risk through automated eligibility testing and selection and reserve/pricing calculations
Demica's reporting solution and sale of receivables process methodology facilitates the rating agency process
Citadel ASP has the functionality to monitor and report on the substantial volumes of trade receivables information required to facilitate successful securitisation transactions.More information on the Citadel Platform