On 4 September 2013, the European Commission published a draft regulation on the regulation of European money market funds. Money market funds are important investors in certain types of securitisation, particularly asset backed commercial paper, and the draft Regulation includes some detailed provisions dealing with this relationship. This is explained in the recitals: “Due the fact that during the crisis certain securitisations were particularly unstable, it is necessary to impose maturity limits and quality criteria on the underlying assets”. The limitations imposed are such that the only types of securitisation which are eligible are those with underlying assets consisting of short term corporate debts, such as trade receivables. Assets linked to the acquisition or financing of services or goods by consumers (such as personal loans, auto loans, credit card debts and residential mortgages) are expressly excluded. The draft regulation also requires that the underlying corporate debts be “of high credit quality and liquid”.
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trade receivables
Trade Receivables Securitisation
By Nick Stainthorpe on
Over the last 12 months we have seen a marked increase in interest in trade receivables financing in general and trade receivables securitisation in particular. This is a specialised area which brings with it unique challenges but also stable long term financing opportunities.
Introduction
Trade receivables are commercial debts generated by the sale of goods and services between businesses. From a financier’s perspective, they are an attractive asset because: (i) they are self-liquidating; (ii) (typically) short-dated; (iii) often suitable for revolving financing and (iv) there is an enormous volume and variety of receivables to finance and a range of techniques to do so.
Trade receivables can be less volatile than consumer receivables because companies are hesitant to stop paying their suppliers (especially where alternatives are limited). While debtor performance is affected by the economic cycle, trade receivables themselves are unlikely to be affected by asset bubbles of the type which affect other securitisable assets. Historically trade receivables securitisations have performed well and in some transactions, the revolving period has continued for over a decade.
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