New Source of Funds
For companies seeking an alternative to a traditional funding source, a sale of receivables can achieve this.
By utilizing the Net Present Value cash flow model as the base amount for the securitization advance, the result is a strong cash flow that normally exceeds the Net Book Value of the securitized portfolio. Also, the securitization eliminates any negative cash flow through the term of the lease.
Through accessing the private capital markets, the securitization structure has been simplified making it easier to understand and more importantly, simple to administer. Typically, the upfront costs associated with this type of program are less than establishing a traditional bank facility, and the need for rating agencies on a deal by deal basis are not required as we do not access the public conduit market. Our experience with these transactions provides Sellers with an alternative that is proven.
Low Cost Financing
This securitization structure allows the low cost of funds achieved by the Trust through its credit rating to be passed on to the Seller. To gain a strong rating, the credit quality of the receivables purchased by the Trust is enhanced through the structure of the securitization transaction.
Off Balance Sheet Financing
Removing the receivables from the balance sheet and using the proceeds from this sale to pay down any debt on the balance sheet allows for capital tax savings. There are other financial statement covenants that may be positively impacted from this form of financing.