Export Assist can help the exporter create an asset-backed structure
that can be widely used for pools of export receivables. These
pools can involve more than one asset class, including accounts
receivable sales, medium-term notes discount, Letters of Credit
sale purchase and other forms of short and medium-term financing.
By selling the export accounts receivable, corporate treasury
could substantially save equity costs that would otherwise result
from traditional balance sheet financing. This is especially
true if the third party credit enhancement of the export receivables
results in a higher credit rating for this securitized export
Payments on the export receivables would
be applied to repayment of the commercial paper. However, match
funding of the fixed-term
commercial paper with these export receivables is far from
exact and very inefficient. The structure holding the export
assets does not directly link the cash flow nature or payment
dates with the issuance of commercial paper and its payment
or repayment to the paperholders. At times, this results in
maturing commercial paper being funded with new issuances.
A liquidity line of credit is generally provided by an irrevocable
bank line of credit to support payment to the commercial paperholders.
Export receivables credit support must
be supplied to cover any receivable losses. This credit support
is generally provided
by third party credit enhancement such as international credit
insurance, over collateralization or, at times, recourse to
the U.S. exporter. Specialized international credit insurance
be arranged by Export Assist in the captive insurance market
or by substituting recourse back to the U.S. exporter by transferring
partial risk to the exporter’s existing insurance captive.
Export-related receivables are generously
excluded from the corporate asset calculation when negotiating
your bank credit line limits.
Securitizing those export receivables is an effective way of
generating the additional cash flow that has been excluded from
your bank credit line.
Purpose Export Corporation
In order for the exporter to benefit from an export-related
receivables-backed program, Export Assist can form a “special purpose export
corporation” to issue the commercial paper. This special
purpose export corporation is structured to be bankruptcy remote
and its only business is to finance export receivables. This
special purpose export corporation typically purchases the export-related
receivables from the U.S. exporter for cash, thereby providing
immediate working capital for newly generated export receivables.
Particular items of importance when structuring a special purpose
export corporation for the securitization of your export receivables
- type of special purpose vehicle
- the revolving period – maturities
- commercial paper payment structure – liquidity
- protection and avoidance from bankruptcy
- accounting and tax structure – deferral and Subpart
The special purpose export corporation
would normally be incorporated in the U.S. Virgin Islands and
could provide corporate shareholders
with avoidance of Subpart F tax together with income tax deferral.
Individual shareholders could avail themselves of reduced tax
on dividends or they could consider various estate planning options.
Let Export Assist structure a securitized
transfer of your export receivables. We will create the special
purpose export corporation
and provide ongoing management of the entity, including administration
of the export receivables and monitoring of third party credit
enhancement and compliance.