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2:00 TRACK B TRADE RECEIVABLES SECURITIZATION: CASE STUDY. Moderator: Adrian Katz, Chief Executive Officer, FINACITY, (203-428-3540, ) Panelists: Martin Jensen, Vice President, DEUTSCHE BANK, (212-250-9906, )

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Adrian Katz, Chief Executive Officer, FINACITY,



Martin Jensen, Vice President, DEUTSCHE BANK,




Antonio Vidal Carrilo, Chief Financial Officer, PAPEL, CARTÓN Y DERIVADOS S.A DE C.V. (

legal framework
Legal Framework
  • Mexican Securities Market Law in connection with the issuance and placement of securities.
  • Other statutes dealing with the establishment of Mexican trusts and the assignment of receivables.
  • Mexican trusts as a vehicle to carry out securitizations.
    • Established by the Originators with the purpose of issuing debt and using the proceeds thereof to purchase receivables.
transfer of receivables
Transfer of Receivables
  • Originators transfer receivables to the trust.
    • The transfer is made through assignment of collection rights.
    • The assignment has to be notified to the customers.
  • Rules regarding notification to customers depend on the nature of the agreement under which the assignment is made.
    • The notification process may be formalistic and time-consuming.
    • A factoring agreement would provide more flexibility.
    • Notifications under a factoring agreement could be made simply by inserting legends on the invoices or sent by fax or by registered mail or e-mail.
funding issuance of securities
Funding/Issuance of Securities
  • Debt issued by the trust could take different forms:
    • Securities issued by the trust in the Mexican market (Certificados Bursátiles).
    • Notes or other securities issued by the trust and placed outside of Mexico.
    • A direct loan.
  • Securities to be issued in the Mexican market must be registered at the National Securities Registry.
    • An application should be filed before the CNBV.
  • When the trust issues notes or other securities outside of Mexico in a public placement, the only requirement is that a notice be filed before the CNBV.
general tax aspects
General Tax Aspects
  • Generally, trusts are “transparent” for tax purposes; that is, they do not constitute separate taxable entities. In most cases the debt issued by the Trust is not accounted for as debt of the Originators and allows off-balance sheet treatment.
  • In cases when the debt is placed in the Mexican market there are no withholding taxes. In case where the debt is placed abroad, Mexican withholding taxes apply to interest payments.
  • Proper structuring of a receivables securitization may provide a dual treatment of the debt incurred by the trust; i.e., not treated as debt of the Originators for accounting purposes, but treated as their debt for tax purposes.
  • When using a factoring agreement, specific rules regarding VAT on the payments of the securitized receivables should be observed.
  • Tax aspects should be carefully considered when structuring a securitization.

Saldo Neto D/C + $

  • Deuda + Reservas
  • Reservas :
  • Dilución
  • Pérdidas
  • Mantenimiento
  • Rendimiento



Transaction Diagram


$ para adquirir Derechos al Cobro

Documentos de Deuda

  • Cuentas de Ingresos
    • Fondo de Gastos de Mantenimiento
    • Fondo de Reserva
    • Fondo General
  • Otras Cuentas


Contrato de Factoraje

Periodo de Revolvencia

Contrato de Administración. Servicios y Reportes


Servicios de Cobranza Delegada

$D/C Pagos



Administrador Maestro




Producto de Venta

transaction description
Transaction Description
  • The Originators create a Mexican trust.
  • The Originators enter into a factoring agreement with the Trust and transfer all their collection rights derived from sales to customers.
  • The Trustee issues debt.
    • Certificados Bursátiles placed in the Mexican market.
    • Issuance of securities (notes) outside of Mexico.
    • Through a direct loan.
  • The Trustee uses the proceeds to purchase receivables from the Originators.
  • Thereafter, during the Revolving Period, the Trustee receives all funds from the collection of the receivables and uses such funds to constitute reserves and to purchase new receivables from the Originators.
transaction description1
Transaction Description
  • The factoring agreement includes formulas for the computation of reserves:
    • Dilution.
    • Loss Reserve.
    • Yield Reserve.
    • Maintenance Reserve.
  • The factoring agreement includes an “Aforo” a formula. If the “Aforo” is equal to or higher than one, excess amounts are used by the trust to pay for new receivables from the Originators.
transaction description2
Transaction Description
  • The application of the formulas in the assignment agreement is made by the Administrator under a Bond Administration Agreement. The Administrator informs the trustee of the amounts available for the Originators pursuant to the Aforo computation and the amounts to be applied to the waterfall in the trust agreement
  • Servicing agreements are also executed for the collection of the receivables transferred to the trust. Servicing agreements may be entered into with an outside servicer or with the Originators.
transaction description3
Transaction Description
  • During the Revolving Period, the trust receives the funds from the collection of the Receivables and applies them under a waterfall:
    • Maintenance fund, to pay:
      • Trustee fees.
      • Administrator and servicing fees.
      • Common rep, in its case.
      • Auditors
      • Rating Agencies and
      • Other maintenance expenses
    • Reserve Fund:
      • Reserves for payment of withholding taxes, interest and principal on the next maturity date.
    • General Fund:
      • All funds here are used to purchase new receivables.
    • At the end of the Revolving Period, the trustee:
      • Stops purchasing receivables.
      • Uses all the proceeds from collection of the assigned receivables to pay the debt.
    • All funds remaining are delivered to the Originators at the end of the transaction.
papel carton y derivados s a de c v

Papel, Carton y Derivados S.A. de C.V.

2nd Annual Securitization in Mexico:

Financing the Future

October 29-30, 2007

Mexico City, Mexico

  • Finacity Overview
  • 2. PCD Transaction
  • 3. Conclusion

Proprietary and Confidential



1. Finacity Overview

Proprietary and Confidential



finacity overview
Finacity Overview

Finacity makes trade receivable securitization less complex, yet more cost-effective, efficient, and global

  • Finacity possesses proprietary global servicing, collection and reporting capabilities
  • Finacity currently processes and funds approximately $10 Billion of trade receivable flows annually, and at peak has processed over 10 million invoices annually
  • Offerings include both domestic and international receivable programs for clients and obligors located in such countries as Argentina, Bulgaria, China, Egypt, France,
  • Indonesia, Italy, Jordan, Mexico, Pakistan, Philippines, Russia, South Africa, Spain,
  • Turkey, Ukraine, United Arab Emirates
  • Finacity strategic partners are leading providers of banking, global trade and risk mitigation services. They include ABN AMRO Bank, Bank of America, Euler Hermes ACI, AMROC Investments, Texas Pacific Group and Kleiner Perkins Caufield & Byers



key benefits
Key Benefits

Finacity’s unique construct and execution capabilities benefit corporations by:

  • Streamlining operations by standardizing legal and accounting requirements
  • Enforcing homogeneous credit pool underwriting even for a diverse portfolio of obligors
  • Assuming certain duties and risks of the Seller Servicer
  • Introducing transaction credit enhancements
  • Structuring efficient cross-border, multi-currency operations



selected transactions
Selected Transactions

Finacity Innovates in Trade Receivables Securitizations

$250 MillionIntegrated 27 subs /18 platforms $55 MillionAll obligors from non-OECD countries$150 Million$300 MillionAchieved true-sale treatment across complex jurisdictions$105 MillionAchieved a highadvance rate

$55 MillionInvoice volume exceeded 10 million per year$40 MillionDollar denominated trade receivable securitization backed by a Mexican Peso Asset Type

$21.5 Million $50 Million$19 Million + MXN 550 MillionFirst Ever Mexican Domestic Trade Receivables Securitization



2. PCD Overview

Proprietary and Confidential




PCD Overview

Leading Mexican Paperboard and

Containerboard Manufacturer

Papel, Carton y Derivados S.A. de C.V.

PCD, a private company founded in 1973, manufactures paperboard and containerboard. Its customers include, but are not limited to, Grupo Lala, Alpura, Sabritas, Honda, Coca Cola, Ideal Esándar, Starbucks, and Tequila Herradura. In 2006, its year-over-year net sales grew 40% to MXN 986 million. Through August 2007, PCD’s sales were MXN 837 million. PCD employs approximately 1,400 people. Fitch has rated the company at BBB-.

PCD’s headquarters are located at Camino Viejo a Cortazar Km. 2.5, Celaya, Gto. CP 38020.

Proprietary and Confidential



transaction overview
Transaction Overview

Transaction Overview

Full compliance with regulatory requirements

Rated by S&P Mexico, plans to register with CNBV

Peso-denominated liabilities and assets

Facility size: MXN 270 million senior tranche

Asset base: Mexican domestic receivables

Finacity Value-Added

Achieved a successful execution for a variable amount of accounts receivable, thereby allowing PCD to raise the amount of its securitization by 25% as its sales grow over time

Daily reporting and funding

Proprietary and Confidential



4. Conclusion

Proprietary and Confidential





Finacity’s comprehensive and compelling securitization program allowed PCD to maximize the liquidity obtainable from its accounts receivable portfolio

  • Optimize working capital and improve its balance sheet
  • Mitigate risk
  • Reduce cost/increase profitability
  • Support cyclical business operations
  • Reduce dependency on other third parties funding sources
  • Capture valuable insights about business process
  • Better utilize internal resources

Proprietary and Confidential




Contact Information

Adrian Katz

Chief Executive Officer

Finacity Corporation

Antonio Vidal Carrillo

Chief Financial Officer

Papel, Cartón Y Derivados, S.A. de C.V.

Proprietary and Confidential