Friday, February 19, 2010

Trade Receivable Securitizations Make a Comeback

Original posted on the International Securitization Review:

Trade receivables have re-emerged as a favoured asset class among securitisation market players, Dechert lawyers said in a report. This is due to their short maturities, traditionally straightforward deal structures and a historic ability to provide companies that have less than top-grade credit with access to the capital markets.

"The costs of rapid expansion and globalisation have led to an increased need for working capital on both sides of the Atlantic, and some global companies have begun to finance their European subsidiaries using methods more traditionally utilised in the United States (i.e., trade receivables securitisation)," Dechert said.

In addition, some lenders have turned to Europe in search of short-term assets because of perceived saturation within the US trade receivables market and the appearance of room for growth on the continent.

The majority of Europe's trade receivables are produced in England, France, Germany, Italy, Spain and the Netherlands.

"Whereas many United States trade receivables opportunities may have already been absorbed by the market (or simply moved from one conduit to another), new opportunities are still available within Europe, particularly with respect to cross-border transactions," Dechert noted.

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