Trade receivables have re-emerged as a favored asset class among European securitization market players and are likely to remain in demand as the global securitization market recovers, a report from the law firm Dechert said.
Shorter maturities, traditionally straightforward deal structures and a historic ability to provide companies that have less than top-grade credit with access to the capital markets, make this asset class appealing in the current market environment.
“The costs of rapid expansion and globalization have led to an increased need for working capital on both sides of the Atlantic, and some global companies have begun to finance their European subsidiaries using methods more traditionally utilized in the U.S. (i.e., trade receivables securitization),” said the report. “In addition, some lenders have turned to Europe in search of short-term assets because of perceived saturation within the U.S. trade receivables market and the appearance of room for growth on the continent.”
Today, the majority of Europe’s trade receivables are produced in England, France, Germany, Italy, Spain and the Netherlands. “Whereas many U.S. trade receivables opportunities may have already been absorbed by the market (or simply moved from one conduit to another), new opportunities are still available within Europe, particularly with respect to cross-border transactions,” the report said.