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Trade Receivables Securitisation

Trade Receivables Securitisation is an efficient and competitive way of financing a diversified trade receivables portfolio. Securitisation programmes provide corporates with commitment and diversification of funding sources. The portfolio approach eliminates individual debtor approval and increases total funding.

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How does it work?

A securitisation programme is based on the sale of trade receivables to a Special Purpose Vehicle (SPV), which issues debt to funders. Funders finance the purchase of these receivables. Debt issued by the SPV is at an implied credit rating. This reduces funding costs compared to other types of financing available to the seller.

The level of financing is based on portfolio performance as a whole, not on specific debtor names.

Benefits

Improved liquidity

Access to committed funding

Potential off-balance treatment

Access to trade receivables assets

Portfolio diversification

Attractive risk-return profile

Success factors

Trade Receivables Securitisations provide a number of benefits to a corporate. However, due diligence and a thorough understanding of portfolio characteristics are required early-on to ensure the optimal financial structure is realised.

Portfolio diversification

The receivables portfolio should be diversified across at least 50 debtors, with no individual debtor balance representing a significant portion of the portfolio

No restrictions

The receivables must be unencumbered and free of any restrictions on a sale or transfer, including debt covenants and receivable contract restrictions

Collection and dilutions

Good portfolio collection and dilutions performance and with the majority of clients paying on, or shortly after, the due date, and have low credit note balances

Thought leadership