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SECURITIZED EXPORT FINANCE ASSETS

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 finance program.

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 receivables 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 the 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 can 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.

Special Purpose Export Corporation Top of Page
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 are:

  • 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 F.

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.

 

 
   
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