The Treasurer’s Guide to Trade Finance

Chapter 7 Trade financing techniques

Securitisation of receivables

Larger companies that generate a sufficient

volume of receivables may be able to raise

finance through securitisation. The following

case study is an example of how this

technique can be used. It also shows how

the proceeds from a transaction can be used

in a variety of ways.

Case study

International chemicals distribution group

The group wanted to open a EUR 250 million funding facility by securitising

trade receivables denominated in EUR and USD. The receivables were

originated by the group’s operating subsidiaries in the USA and a number of

European countries.

The group’s bank and another two

banks arranged for the establishment

of a special purpose vehicle (SPV) in

Ireland. Using funds raised via the issue

of A1/P1-rated commercial paper (CP)

into the asset-backed commercial paper

(ABCP) market, the SPV purchases the

receivables directly from the company

(indirectly in the case of Italy and the

USA). The structure is operated without

recourse to the company, which receives

funds at the cost of the CP issuance plus

a credit-related margin on any drawn

funds. This facility has freed cash for the

distribution company and allowed it to

refinance some acquisition financing.