For companies, liquid capital is like oil in an internal combustion engine: Nothing runs without it and it needs topping up on a regular basis. If customers default on payment, overnight and term money lendings mount up and liquidity dwindles. What do you do in this situation? ABS transactions are one option available to larger SMEs and corporations. ABS stands for asset-backed securities, in other words assets that are backed by securities. LBBW has been helping companies to securitize their payment claims (asset securitization) with great success since 1999.
The concept is simple: Your company's accounts receivable are sold in a bundle to a company that you have established for this purpose. This entity refinances itself over the capital market by issuing securities to cover the amount of the receivables, and your company receives the respective liquidity as a purchase price. These securities can be bonds with variable terms (ABS bonds) or asset-backed commercial papers (ABCP), which are short-term bonds.
This is also a beneficial refinancing option for leasing companies. Click here to find out more about Refinancing Leasing .
The benefits of ABS transactions
- They reduce drawdowns on the company's lines of credit.
- ABS transactions breathe with your requirements and act as an incentive for you to sell your receivables.
- The special purpose entity gives your company indirect and anonymous access to the capital market.
- Offloading trade receivables improves your balance-sheet structure, which can lead to a rating upgrade.
ABS packages for SMEs
ABS transactions are complex, but the process is easy to execute. Although this is an option aimed mainly at enterprises with a sufficiently high volume of receivables, LBBW is also happy to put together suitable package solutions for SMEs starting at volumes of EUR 20 million. These packages include structuring of the receivables and the special purpose entity, contract documentation including German translation and customized ABS software.
We have successfully executed dozens of ABS transactions since 1999 in the form of ABS bonds, in the mid-market, with leasing companies and captives. LBBW also offers tailored solutions for lease and residual value receivables. The ABCP conduit "Weinberg Capital DAC" sponsored by LBBW has many renowned reference customers and has excellent Fitch/Moody's ratings of F1/P-1.
Benefits of ABS/ABCP solutions for SMEs
- Liquidity is secured and managed in the long term, which extends financial scope.
- Anonymous access to money and capital markets at attractive conditions.
- Financing volume adjusts to the development of total receivables.
- Positive incentives to optimize debtor management (shorter settlement times for receivables, determining standard processes).
LBBW was among the top five providers of euro asset-backed securities in the German-speaking area in 2017. To give you an example: LBBW arranged an ABS bond solution with a volume of EUR 1.192 billion for Daimler AG.
ABCP-DLT solution Weinberg DLT
Weinberg DLT Platform – the first digital ABCP platform on the market – was developed by LBBW and its technology partner targens GmbH to significantly reduce settlement time (t+0 possible) and to streamline issuance processes for ABCP transactions.
The Platform enables the conduit “Weinberg Capital DAC” to settle legally effective, digital ABCP transactions for registered investors using Distributed Ledger Technology. The attribution of the security to the buyer is stored as a token in the DLT and exchanged for payment immediately (“Delivery versus payment”). The settlement takes place via smart contracts, which shortens the settlement process from two days to less than an hour. This mitigates both the settlement risk and the operational risks during execution. The rating agencies Fitch and Moody's confirmed the existing rating of the Asset Backed Commercial Paper for the digital issue process.
If you would like to know more about our ABCP-DLT solution Weinberg DLT, please contact:
Managing Director Securitization and Acquisition Finance
Phone: +49 711 127-49379