On Securitisation Of Accounts Receivable

For many years, the accounts receivable of China's listed companies has been maintained at a high level, resulting in serious shortage of funds and increased operating costs.

To this end, people are actively looking for a management method that can not only give full play to the promotional role of accounts receivable, but also control and reduce the cost of accounts receivable.

Securitisation of accounts receivable is an important attempt.

It is necessary to implement the securitization of accounts receivable. Asset securitization is the most important and fastest developing financial innovation tool in the world financial field in the past 30 years.

It collects assets that lack liquidity but has the expected stable cash flow in the future to form an asset pool, which is pformed into a securities that can be sold and circulated in the financial market through restructuring.

The essence of securitisation is that the financier will be pferred to the investors by the future cash flow right of the securitized financial assets, and the ownership of the financial assets can be pferred or not pferred.

Internationally, securitisation accounts receivable have covered a wide range of areas such as car receivables, credit card receivables, rental receivables, aviation receivables, highway charges and so on.

Generally speaking, accounts receivable securitisation has many advantages over conventional accounts receivable management methods, mainly reflected in: 1. good financing methods.

The securitisation of accounts receivable is to sell accounts receivable directly to an ad hoc trust institution specializing in asset securitization (SPV) and to remit into SPV's asset pool.

After reorganization, integration and packaging, SPV issued securities to domestic and foreign capital markets on the basis of accounts receivable, and determined the price of the issued securities according to the credit rating, quality and cash flow of accounts receivable.

The sale of accounts receivable to SPV, which is proficient in securitisation, can improve the quality of company assets, enhance liquidity and improve company's financing ability. It also saves the trouble of managing accounts receivable and pfers the risk of loss caused by accounts receivable.

At the same time, this kind of financing usually has lower financing cost and enjoys more specialized financing services.

The management cost can be reduced by 2..

An important content of asset securitization is to realize the bankruptcy isolation of securitized assets, that is, to separate accounts receivable from the balance sheets of company (promoters), narrow the scope of bankruptcy assets and reduce bankruptcy costs.

This can improve the quality of company assets and reduce the cost of company management.

At the same time, because large institutional investors such as insurance companies, mutual funds and pension funds tend to choose higher quality securities, the general corporate bonds are hard to get the investment of these institutions, while the asset credit enhancement technology used in the securitization process improves the quality of securities, making it easier for companies to finance.

3. reduce paction costs.

Accounts receivable securitization is carried out by specialized agencies. These institutions are proficient in the management of accounts receivable. As owners of accounts receivable, as long as the accounts receivable is sold to such an institution, they can avoid the difficulty of tracking accounts receivable, recovering debts, reducing the loss of bad debts, and greatly reducing paction costs.

In addition, securitisation of accounts receivable is conducive to optimizing the financial structure, making full use of assets and optimizing company investment portfolios.

Two, the operation mode and procedures of accounts receivable securitisation. The main participants in securitisation of accounts receivable are sponsors (accounts receivable sellers), service providers, issuers (SPV), investment banks, trust institutions, credit rating agencies, credit enhancement agencies, asset appraisal agencies and investors.

These institutions play different roles in the asset securitization market.

Credit rating agencies and credit enhancement agencies correspond to the issuance of accounts receivable backed securities, which are very important, which are related to the success of securities issuance and the cost of issuance. Trust agencies collect and manage securitized accounts receivable through special collection accounts, and are responsible for paying principal and interest to investors in accordance with the entrustment agreement of securitization.

The specific operation procedures of accounts receivable securitization can be divided into five stages: 1..

In the process of securitisation of accounts receivable, an important issue is to choose accounts receivable, not all accounts receivable are suitable for securitisation.

The accounts receivable that can be used for securitisation should have the following characteristics: (1) there is a certain amount of cash inflow that can be predicted; second, the interest income earned from accounts receivable should be sufficient to cover interest payments on mortgage-backed securities; third, it has mortgage value and liquidation value; and the repayment condition is clear.

The 2. is to build a securitization carrier SPV to achieve real sales.

SPV can sometimes be established by the original equity holder, but it is a trust entity with the sole purpose of securitisation of accounts receivable. It only engages in a single business: buying securitization accounts receivable, integrating receivable rights and issuing securities as a guarantee.

It is completely independent of the original assets holders in the law and is not affected by the bankruptcy of the sponsors. All its income comes from the issuance of accounts receivable backed securities.

In order to reduce the cost of accounts receivable securitization, SPV is generally located in tax-free countries and regions.

3., improve the trading structure and conduct internal ratings.

In order to improve the trading structure of accounts receivable securitization, SPV needs to sign a trusteeship contract with the original depository bank and, if necessary, reach a liquidity agreement with the bank.

After that, the credit rating agencies evaluated the paction structure and accounts receivable support securities by examining the legality and validity of various contracts and documents, and gave the results of internal ratings.

Generally speaking, the rating results are not very ideal at this time, and it is difficult to attract investors.

4. credit increase.

In the issuance of securities, the repayment of accounts receivable backed securities depends on the smooth realization of future cash inflows generated by securitized accounts receivable, which has certain risks for investors. Therefore, the following measures can be taken: 1. Bankruptcy isolation.

By eliminating the impact of the credit risk of the original owner on the investment income, the credit rating of the accounts receivable support securities will be improved.

Second, priority securities and sub securities are divided.

The priority securities should be paid only for subordinated securities before paying the principal and interest and the principal and interest of the preferred securities. After paying the principal and interest of the preferred securities, the subordinated securities will be paid back.

This reduces the credit risk of priority securities and improves its credit rating.

Financial guarantee.

Credit guarantee is provided by another good financial institution, and the pferor of the account receivable gives a promise of securities repurchase, that is, if the principal and interest of the securities are not paid in time, it should be paid by the guarantor or the selling party of accounts receivable, so as to protect the interests of investors.

5. securities rating and sales.

After the credit is raised, the issuer will also need to hire a credit rating agency to conduct a formal issuance rating on the accounts receivable support securities, and announce the result of the rating to investors, and then underwrite by the securities underwriter.

After the issue is completed, it can be listed on the stock exchange or outside the market and circulated in the two tier market.

Finally, the proceeds from the issuance of securities are used to pay the purchase price of securitized accounts receivable, and the principal and interest are paid to investors by cash inflow from securitized receivables.

Three, the measures to be taken in securitisation of accounts receivable should be taken into consideration. The author believes that the current implementation of securitisation of accounts receivable by Listed Companies in China should focus on solving the following problems: 1..

Accounts receivable securitisation needs more mature capital market, and large scale and strong institutional investors are also needed.

However, the capital market in China started late and the development is not yet mature. Institutional investors are small in scale and small in number. Individual investors can not become the main investors due to lack of timely information and lack of necessary professional knowledge, which will restrict the development of accounts receivable securitization in China.

Therefore, we should strengthen the construction of the financial market as soon as possible, improve the long-term capital market such as stocks and bonds, actively train domestic and foreign institutional investors, and increase the propaganda of the securitization of accounts receivable to attract more small and medium-sized investors.

2. establish credit system.

The key to the success of securitisation of accounts receivable is that the default rate is relatively low and the future cash flow is relatively stable. Therefore, the credit level of the responsible person of accounts receivable (that is, whether the responsible person of accounts receivable can repay repayment) is an important factor to decide the efficiency of Securitization.

The establishment of credit system helps to identify the credit level of the responsible person of accounts receivable, the cash flow status of accounts receivable and the structure of default function, so as to identify the securitisation structure of accounts receivable. At the same time, the establishment of credit system also helps to promote the development of asset securitization market.

Therefore, the implementation of accounts receivable securitization must establish a sound credit system.

3., strengthen the management of accounts receivable.

In order to accurately grasp the future cash flow of accounts receivable, control the basic risks of accounts receivable securitization, thus stabilize the cash flow of accounts receivable asset pools, and fully attract investors. The sponsors or SPV of securitisation must be clear about the source of each account receivable and the creditworthiness of the responsible person.

The detailed credit information of the sponsors corresponding to the responsible person of the accounts receivable must be accurately recorded and corresponding documents, such as credit policies, repayment plans, penalties for breach of contract and recourse provisions.

4., improve the legal system.

The securitization of accounts receivable is still a new topic in our country.

Although the securities law, the guarantee law, the bankruptcy law, the trust law and the contract law have been implemented, there are still lack of specific legal provisions and policy arrangements related to asset securitization. There is a lack of criteria and standards for the supervision of the participants. It is difficult to guarantee the pparency of the securitization process and the high quality of securitized assets.

Therefore, the establishment of a sound legal system is the basis for securing accounts receivable and a key factor to ensure the stability of the financial system.

5. training professional financial talents.

Accounts receivable securitization is a very comprehensive financing business, involving many fields such as securities, guarantee, evaluation, finance and so on, which requires Asset Management Co to have a large number of high-quality financial talents.

They should not only have advanced theoretical knowledge and rich practical experience, but also fully understand China's specific national conditions and market conditions, and be familiar with laws and regulations in finance, accounting and taxation.

Personnel training in this area must be strengthened to meet the future development of accounts receivable securitization.