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 <########????link to 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).