Securitization in Emerging Markets

Transcription

1 May 15, Securitization in Emerging Markets Prepared for: THE WORLD BANK Adrian Katz

2 Table of Contents I. I. Finacity Finacity II. II. Securitization Securitization III. III. Finacity Finacity and and Emerging Emerging Markets Markets Case Case Studies Studies IV. IV. Finacity Finacity Securitizations Securitizations Add Add More More Value Value V. V. Contact Contact Appendix: A. Representative Transactions Appendix: A. Representative Transactions - 2-

3 I Finacity - 3-

4 I. Introduction Finacity is a leading provider of securitization solutions: Strategic and investment partners include ABN AMRO N.V., Amroc Investments, Bank of America, Euler Hermes ACI, Kleiner Perkins Caufield & Byers, and Texas Pacific Group. Annually, Finacity s multi-lingual and multi-currency servicing platform: Supports over $15 billion in receivable flows At peak has supported approximately 1 million obligors At peak has processed over 10 million invoices Finacity has worked with sellers and obligors based in approximately 80 countries, including: Spain, France, Italy, Turkey, Russia, Ukraine, U.S., Canada, Mexico, Argentina, Brazil, China, Indonesia, Jordan, Pakistan, Philippines, United Arab Emirates and South Africa. - 4-

5 I. Finacity Overview Finacity s unique construct and execution capabilities enable corporations to benefit through: Lower cost of funds Greater liquidity from higher advance rates via foreign assets eligibility and daily availability calculations Reduced execution costs Simplified management of domestic and complex global securitization operations True sale treatment Vendor financing solutions without the creation of debt - 5-

6 II Securitization -6-

7 II. Securitization Structure Finacity purchases assets from the Seller into a SPE created and owned by Finacity. Finacity becomes the Servicer of Record. Finacity can either take over the servicing or sub-service back to the Seller. Finacity analyzes the portfolio, underwrites obligor credits and determines the subordination required to protect for the risk of loss and dilution. Finacity may include trade credit insurance to increase liquidity for the Seller. Backed by the applicable cash flows of the assets, Finacity structures securities to investment grade levels. Finacity issues securities (notes) to the selected investor to fund the Seller s assets. Finacity handles all ongoing administration and reporting for the securitization Originator True Sale of assets Proceeds - Owned/Serviced SPE Securities Proceeds Investors Servicing of assets Liquidity Facility

8 II. Challenges Traditional Securitization Challenges Expense and Complexity High upfront costs Highly customized legal and accounting requirements Servicing and Fraud Risk Credit Underwriting Capital markets lack of comfort with servicing by non-investment grade companies Standardization of servicing and reporting are required No standard for underwriting multiple sellers and their obligors in today s market Cross Border Risk Export receivables pose challenges not addressed efficiently by any of the structures in the market today Proprietary and Confidential -6 - Finacity Solutions Finacity s process makes it affordable to securitize for both large and small deal sizes. Standardization of securitization documentation, process, and management, make Finacity s approach seamless. Finacity performs most of the detailed support required, for you. Finacity purchases assets and becomes Servicer of Record, standardizing servicing and reporting. Daily monitoring of receivables activity minimizes both operation and fraud risk. Integrated scoring and risk underwriting in conjunction with Euler Hermes Finacity has developed its own standard with proprietary trade credit insurance eliminating common policy conditions. Political risk, insolvency and protracted default coverage through Finacity s structure in conjunction with Euler Hermes

9 II. International Capabilities Finacity can purchase, consolidate, and securitize foreign receivables through a simplified structure. Finacity can include less established obligors or obligors from more challenging countries through its proprietary trade credit insurance with Euler Hermes. Finacity s multi-lingual / multi-currency platform manages the operational and reporting requirements necessary for capital markets funding. Operational and legal issues posed by numerous country jurisdictions create hurdles. ABCP conduits or asset-based lenders often prefer not to tackle them without Finacity. Finacity offers a proprietary solution to sale treatment under IAS. GAAP sale treatment is fairly straightforward. Proprietary and Confidential -9 -

10 III Finacity and Emerging Markets Case Studies

11 III. Alliance One International The Challenge In early 2006, AOI had tens of millions of dollars in receivable assets locked up in non-oecd countries. All Obligors from non-oecd countries, including: Argentina, Azerbaijan, Bulgaria, China, Egypt, Indonesia, Israel, Jordan, Pakistan, Philippines, Russia, South Africa, Ukraine, and the United Arab Emirates A B credit rating from Standard & Poor s Cross-border transactions Multiple jurisdictions Proprietary and Confidential -13 -

12 III. Alliance One International Solution Through innovation and flexibility, Finacity overcame these challenges with: Intensive data collection A bankruptcy remote structure, via Finacity-owned SPE Trade credit insurance from Euler Hermes Invoice verification and repository Proprietary and Confidential -13 -

13 III. Alliance One International Detailed Structure Reports Obligors (Customers): Cigarette Manufacturers Payments SPV Account Distribution Instructions Administrator: Receivables Company: Alliance One International Goods & Services Purchased Receivables Sale Proceeds + Servicing Fees Collections Reports Finacity Receivables , LLC Seller VFN P&I Note Proceeds Funding Source: Hannover Funding Company LLC Commercial Paper $ Insurance: Euler Hermes OWNER CP Dealers - Merrill Lynch - Lehman Brothers - JP Morgan Chase - Citigroup $ CP-Investors

14 III. Alliance One International Transaction Results Facility Size: US$ 55 Million Maturity: 3 years Rate: CP + 200bps Full compliance with regulatory requirements: Excellent rating: Placed in an S&P/Moody s A1/P1 rated CP Conduit Off balance sheet: True sale treatment across complex jurisdictions Winner of Euromoney Trade Finance Magazine s Deal of the Year Comprehensive trade credit insurance: 100% of obligors, with 10% coinsurance Update: OECD receivables subsequently added in 2008 for a US$ 100 million facility size

15 III. Vitro VENA The Challenge The first Mexican domestic trade receivable securitization, registered with the CNBV. 2 VENA divisions: Covisa (glass containers) and Alcali (industrial commodities) Cross-border, multicurrency obligors (US$ and MXP$) Contra account, concentration, and term discount issues Full outsourcing taken over from previous funding source Required both Standard & Poor s and Moody s ratings Proprietary and Confidential -13 -

16 III. Vitro VENA - Solution Finacity s proprietary deal structuring process addressed these challenges by: Streamlining requirements the operation by standardizing legal and accounting Enforcing homogeneous credit pool underwriting for a diverse portfolio of obligors Assuming certain duties and risks of the Seller Servicer Introducing transaction credit enhancements Efficiently structuring cross-border multicurrency operations Diligently working to ensure both rating agency requirements were expeditiously met Proprietary and Confidential -13 -

17 III. Vitro VENA Transaction Results Facility Size: Senior Tranche - MXP$ 550mm / Subordinate - US$ 19mm Maturity: 4 years Rate: TIIE+ 120 Bps Full compliance with regulatory requirements: Excellent ratings: AAA.mx S&P, Aaa.mx Moody s Efficient servicing construct: Finacity as master servicer Finacity as bond administrator Great liquidity and higher advance rates: 100% advance on receivables Reduction in the recourse to the company from 50% to 24%,

18 IV Finacity Securitizations Add More Value

19 IV. Servicing To help mitigate servicing risk and to streamline securitization operations, Finacity typically acts as the Servicer of Record. Clients relationships securitization program. with their obligors remain in place under the Finacity can provide servicing oversight to handle all servicing functions from post-invoice to cash application. Finacity s platform can consolidate accounts receivable data from multiple sources. Finacity will handle all the bond administration and reporting generally handled by the note issuer. 24 x 7, web-based reporting provides real-time visibility to servicing, collection, and remittance activities. Proprietary and Confidential -13 -

20 IV. Reporting Finacity reporting capabilities can provide real-time visibility to asset activity. Daily monitoring and reporting to support clients, rating agencies, and investors. Flexible reporting with extensive sorting and filtering capabilities Customized reports to address special requests and requirements of all transaction constituents - Investor, Rating Agency, Insurer, Trustee, and Customer Web-based, real-time visibility Operational reports - Daily, point-in-time status, and activity reports Production reports - Event based reports (e.g., funding event, settlement event, month-end bond administration) Historical reports - Trended data warehouse and risk analysis reporting

21 IV. Reporting Finacity s servicing report capabilities: Reveals valuable knowledge and information trapped within the asset processing chain. Provides insightful recommendations for improvements throughout the product service and delivery supply chain. Potential results include: Improved supply chain efficiency Shortened sales cycle Increased customer satisfaction Lower costs and boosted profits No additional cost to client ADDRESSES PERCEIVED OR ACTUAL OPERATIONAL AND FRAUD RISKS

22 V Contact

23 V. Finacity Contact Adrian Katz Chief Executive Officer T: F: E:

24 Appendix A Representative Transaction Highlights

25 A. Select Transactions $250,000,000 Trade Receivables Securitization Program $300,000,000 Trade Receivables Program Sole Arranger Sole Arranger $105,000,000 Trade Receivables Securitization Program MXN$550,000,000 Trade Receivables Securitization Program Sole Arranger Sole Arranger $55,000,000 Trade Receivables Securitization Program Sole Arranger MXN$270,000,000 Trade Receivables Securitization Program Sole Arranger $150,000,000 Trade Receivables Securitization Program Sole Arranger $150,000,000 Trade Receivables Securitization Program Sole Arranger $40,000,000 Trade Receivables Securitization Program July 2002 Sole Arranger July 2002 CAD$55,000,000 Trade Receivables Securitization Program Sole Arranger July 2002

26 Disclosure This presentation is for discussion only. It is not a commitment by Finacity to arrange or provide financing on these or any other terms. Terms and conditions described herein are subject to modifications and approvals. Without the prior written consent of Finacity, none of the information or documents (or forms of documents) contained herein may be (a) used for any other purpose than your evaluation of the transaction described herein, or (b) furnished by you to any other person other than (i) such of your employees, officers and directors and legal, accounting and other advisers (collectively, "representatives") who have a need to know such information (or a need to review any such documents or forms of documents in connection with your evaluation of the subject transaction), are informed by you of the confidential nature of the information and are subject to appropriate confidentiality restrictions, (ii) as may be required by applicable law or regulations or by an order of a court or governmental agency of competent jurisdiction, provided that you give us prior notice of such requirement and order