Receivable-based finance

Transcription

1 Receivable-based finance Michel Jansen CFO Clondalkin Amador Malnero ING Working Capital Solutions 0

2 Agenda Clondalkin s refinancing and the added value of using receivables Michel Jansen Clondalkin Deep dive into receivable-based finance Amador Malnero ING Implementation experience from the perspective of Clondalkin Michel Jansen Clondalkin 1

3 Clondalkin s refinancing and the added value of using receivables Michel Jansen CFO Clondalkin 2

4 Clondalkin Group Leading international producer of high value added packaging products and services > 700m revenues with strong and consistent cash flow generation 35 locations in 8 countries Market leader in secondary healthcare packaging with #1 position in North America and #3 position in Europe Leading positions in European flexible packaging markets Well diversified business portfolio and geographic footprint Well invested facilities 3

5 Each division has a blue chip customer base Specialist Packaging (55% of sales) Flexible Packaging (45% of sales) Foils, Laminates & Coatings Folding cartons, leaflets, literature, inserts and labels Laminates of aluminium, paper and film Engineered films Resin based laminates 4

6 Setting the Scene Issuance high yield bonds: 170m fixed rate bonds In light maturing of the upcoming 2014; maturities of the bonds, beginning 413m floating rate of bonds strategic maturing reflection in 2013 on the refinancing. Objectives: Refinance Several existing routes debt are pursued with implementation beginning in 2012 Reduce and leverage target closing before mid 2013: Reduce financing Sale of various costs Clondalkin mandates ING as sole arranger for a 90m divisions in the group both in Europe and USA equivalent transaction Refinancing of the senior Revolving Credit Facility Considerations: Issuance of new debt in the markets Multi jurisdiction and multi currency businesses (35 Setup of off-balance sheet trade receivables securitisation sites in 8 countries selling to > 130 countries) transaction Decentralized collection structure (10 different local ERP systems) Difficult environment to launch a Company wide Securitization project mid 2013 May

7 Scope of the Project: the challenge Deliverables: Minimum funding > 60 million High advance rate on the receivable book (>80%) Funding at acceptable pricing levels Off Balance Multi jurisdictions Timing: Within five months Parallel to disposal process and refinancing process Costs Set-up costs < 2.5% of maximum program amount Minimize costs for maintaining the structure Sources Uses Net Cash proceeds from disposals 135 Repayment of borrowing 585 Cash proceeds from receivable-based finance 65 Cash to balance sheet before fees 52 Term B Loans 349 Existing Cash 88 Total sources 637 Total Uses 637 6

8 Clondalkin structure visualised Clondalkin OpCo 1 (Seller) Clondalkin OpCo (Seller) Clondalkin OpCo x (Seller) 1 Clondalkin Acquisition B.V. Master Servicer / Subordinated lender) 4 3 Purchaser 5 2 Atradius Credit Insurer 1. Each seller sells eligible receivables to ING on a daily basis 2. On a monthly basis ING pays the purchase price on portfolio to Clondalkin Acquisition BV (hereafter Clondalkin or Master Servicer) 3. Clondalkin, as subordinated lender pays to ING the loan sized to equal the required reserve (10-15% program) 4. The Master Servicer passes the collections on receivables sold to ING 5. In case of defaults under the receivables, Atradius as credit insurer pays 90% of each claim to ING 7

9 Securitization: an essential piece The Group entered into a Receivable Purchase Agreement (RPA) with ING to sell its trade receivables Off-balance financing facility App. 80% advance rate (testimony to strong book) Initial proceeds 65 million (May 2013) Maximum program amount 90 million All-in finance costs c. 4.6% p.a. (incl. cost of maintaining the facility) Daily, weekly and monthly reporting routines by our businesses of the sales and cash receipts 8

10 Deep dive into receivable-based finance Amador Malnero Managing Director Working Capital Solutions - ING 9

11 Setting the scene Scarcity of liquidity Stricter regulations Economic downturn Liquidity is scarce and banks are de-leveraging Basel III and regulation of FI s are constraining capital and lending Economic environment pressures profitability Working capital management has moved to the top of the agenda Worldwide receivable financing has increased from 1.3tr in 2007 to 2.2tr in 2013 (Europe 1.4tr¹) Treasurers seeking ways to unlock funds trapped in O2C and P2P Banks focusing more on flow and trade products EU Late Payment Directive 1. Factor chain international; 10

12 Drivers for clients to choose working capital products Cash flow improvement / Working capital optimisation Financial ratio management Improve return on capital employed Funding diversification Pricing benefits 11

13 ING s receivable-based financing solutions A/R A/R A/R A/R A/R A/R A/R A/R A/R Receivables Pool A/R A/R A/R Approach: Single debtor Multiple debtors Portfolio approach Granularity: Single/multiple invoice(s) Non-granular portfolio Granular portfolio ING Solutions: ICRF International Corporate Receivables Finance TRPP Trade Receivables Purchase program Each solution depends on the number of debtors and volume of trade receivables Each solution is tailored to the specific needs of the client 12

14 Key principles of TRPP (Trade Receivables Purchase Program) Method of funding using securitisation techniques Granular homogeneous pool of assets Isolated from credit risk of the originator; transferred to ING via true sale Continuously refilled with new assets Principles of TRPP Reliance on performance of portfolio for repayment Insulation from or mitigation of the exposure to the originator events Credit enhancement typically up to AA Structures mitigate the traditional credit risk Ring-fencing, true sale of the pool of receivables Credit enhancement by dynamic reserves Structural mechanisms activated by triggers or financial covenants Structures set up in accordance with S&P methodology In order to achieve equivalent of AA rating, analysis of: pool historical performance and transaction structural features 13

15 Simplified TRPP: portfolio structure Portfolio of trade receivables Receivables Purchase Agreement Servicing Agreement Obligor 1 Products Purchase Price Obligor 2 Obligor 3 Receivables Originator* True sale Receivables Purchaser Obligor 4 Collections Collections Credit Insurance Obligor Policy Obligor N Credit Insurer (if any) Portfolio approach with the seller selling a diversified pool of trade receivables from multiple debtors * please note that multiple-originators and multiple-jurisdictions could be brought under one program 14

16 Key benefits of TRPP for Clondalkin Funding Off-balance sheet treatment Flexibility Management tool Provides funding access to lower rated clients Allows competitive pricing compared to other funding sources Scalable to finance trading growth Diversification of funding sources Possibility to achieve offbalance treatment - credit insurance - substantial transfer of risks and rewards (auditor confirmation) Strong balance sheet management tool - improved financial ratios - lower pricing grid thanks to ratios enhancement Customised (organisation structure and objectives) Portfolio approach provides flexibility in terms of pool composition Multiple jurisdictions and originators possible Silent assignment: no impact on commercial relationship with debtors Encourages best business practices through due diligence of policies, procedures, systems and data, and dynamic monitoring of portfolio's performance Centralisation or supervision of the servicing by the master servicer TRPP: A powerful tool for managing working capital needs 15

17 Implementation experience from Clondalkin s perspective Michel Jansen CFO Clondalkin 16

18 Experience and Learnings: the funding The Initial Funding size is determined by the size and quality of the Accounts Receivable Book eligibility criteria (agreed invoices to be acquired) historic performance of the collections process (cash reserve rate) The Funding fluctuates minimally over time under influence of: the balance between collections and new issued invoices quality of the order to cash process Flexible structure: allows for partial implementation (bridging facility through two tier structure). Resulting in a permanent funding, funding grows as the business grows 17

19 Experience and Learnings: the structure Automate the data flow and reporting We have co-developed a cloud based platform for the data flow and reporting requirements Manage eligibility criteria Monitor historic performance of the collections process We gained significant insight in our accounts receivables through the scientific approach enforced through the securitization process. Develop or buy tools that help improve the performance of the order to cash process (reminder on line and dispute management system) Detailed insight in credit terms and its development Flexible structure: allows for partial implementation (bridging facility through two tier structure). Becomes routine 18

20 Concluding remarks In ING we found a partner that was willing to pioneer with us We reduced the quantum of debt required from the Financial Markets We diversified our financing structure The structure is flexible, resulting in permanent funding with funding levels increasing in line with growth of the underlying business We lowered the average financing costs compared to the alternatives available at the time We realized a significant Working Capital reduction We gained significant insight in our accounts receivables through the scientific approach enforced through the securitization process Nobody told them it could not be done... So they just did it! 19

21 20 Q&A

22 Disclaimer This presentation prepared by ING Bank N.V. ( ING ) is intended to provide information and to serve as a basis for discussion purposes only. While reasonable care has been taken to ensure that the information contained in this herein is fair and reasonable as at the date hereof, ING has not independently verified the information herein and accordingly makes no representation or warranty, express or implied, that the information contained herein is accurate, current, complete or correct. Any estimates in this presentation are provisional only and for indicative, preliminary and illustrative purposes only. This presentation does not constitute any valuation, appraisal or advice and there can be no guarantee that any projected results will be achieved. ING reserves the right, but does not have any obligation, to amend or change such projections or assumptions if ING deems it appropriate to do so. This presentation does not constitute an agreement or a commitment or an offer to commit to or a recommendation to enter into any transaction, or creates any obligations on the part of ING. This presentation and the information contained herein are confidential and may not be disclosed to any third party without the prior written consent of ING. ING does not accept any liability whatsoever for any loss however arising from any use of this document or its contents arising in connection herewith 21