28 th Annual Marine Money Week

28 th Annual Marine Money Week 1 Receivable Financing June 2015

Overview of Securitization The merits of establishing a receivable financing program. Low Funding Costs Low cost of funds because of high credit quality structure and diverse receivables pool Margin based on structure quality rather than the corporate rating Overall structure will be agreed upfront, allowing up-front costs to amortize over the life Efficient funding in the ABCP market Stable and diverse investor base Security of Funding Transaction will usually be operational for 3+ years Increase diversification of customer s funding sources Facility size can be upsized easily by including additional subsidiaries within the existing structure Anonymity of Funding Access to anonymous funding options in the international capital markets No disclosure to CP investors, partners or competitors In most instances, your customers are not impacted by the transaction You continue to service your portfolio and maintain your customer relationships Receivables financing offers Real Added Value. 2

Potential Financing Structure/ Case Study Case Study: Receivables financing as a tool to increase liquidity. 1 2 3 4 Initial Situation/ Challenge/ Solution Problem Goal Result The Global Financial Crisis 2007-2008 has impacted Global Trade which remains even impacted today The downturn of global economy lead to a shipping crisis Decreased demand for freight transportation and reduced freight rates Forcing shipping liners to be even more highly competitive Shipping companies need: A better working capital structure A way to finance their outstanding trade receivable balances Liquidating receivables allowed them to deploy capital for alternative uses Increased diversification of funding sources Financing of receivables provides: Monetization of existing corporate assets, which are many times not encumbered Structured, high credit quality pools of asset results in lower costs of funds Access to additional sources of liquidity Committed receivables financing facility which is secured/collaterized by borrower s trade receivables (e.g. Freightrate receivables): Bridges the gap of receivables payment terms Ability to use capital for other investments 3

Potential Financing Structure/Case Study Receivables financing facility recently provided to a major global shipper. Example: Financing of cargo shipment -related trade receivables Well-known multinational liner shipping company mandated NORD/LB to find a financing solution that would improve its existing working capital structure and provide it with a steady-state funding collateralized by its customer trade receivables. The company s exising trade receivables pool provided the basis for the solution. Proposed Solution Securitization of Receivables Customer Specific Framework Asset class: Trade receivables Transaction size: Initially USD 250 MM, expanded up to $1B Duration: 3 years Terms of payment: 30 days Customer rating: BB- / B2 Transaction rating: AAA, based on rating agency criteria Origination of receivables: Multinational /multi-currency trade receivables originated through the customer s global agency network Financing provided by NORD/LB through Hannover Funding Company Trade receivables pool consists of assets: from different countries and in different currencies (e.g., CNY, EUR, USD, GBP, AUD, CHF, CAD, JPY etc.) Recivables owned by existing subsidiaries in several dozen countries Different legal jurisdictions applied Resulted in a singe source of finacing for the company that was administratively manageable and cost efficient 4

Potential Financing Structure Potential financing structure would operate as follows. 1. You will sell receivables on a true sale basis to a newly established bankruptcy-remote Special Purpose Vehicle (SPV), ABC Ship Funding. The SPV can be owned by you, or it can be registered as an orphan subject to inclusion of a third party entity managing the SPV and providing de minimus equity. Min. of 5% Retained Interest by ABC Shipper 2. Hannover Funding Co. makes a loan to ABC Ship Funding collateralized by the receivables. You will maintain an economic position so that 100% of collected cash is returned to you, less funding costs. 5 Reports including facility details Note Proceeds 2 P&I 3. Your customers will continue to make payments into collection accounts. You will continue to service the receivables and maintain your customer relationships. Neither NORD/LB nor Hannover Funding will interact with your customers. ABC Shipper 1 A/R Funds 4 ABC Ship Funding 4. You will sell additional receivables to the SPV as they are created and receive weekly funding advances. Excess collections not required to maintain the borrowing base are returned to You. Receivables Collections 5. You will produce reports that we develop with You providing a snapshot of all relevant facility details on a weekly or monthly basis. Customers 3 Payments Collection/ Corporate Accounts Anonymity Your transaction is independent and isolated from all other transactions financed by Hannover Funding Company. You are never exposed to the performance of other transactions. 5

Potential Financing Structure/Case Study On a periodic basis, the funding level will be adjusted. USD 1000 Total Receivable Balance Filtering the asset portfolio through a series of eligibility criteria and concentration limits determines an eligible balance for any given month (impacts the funding amount). USD 930 Reduction of Ineligibles (Government, Intra-Company, Delinquent, Contras, TOS>60 Days, etc.) Excess concentrations are determined by the balance of each obligor and that obligor s short-term rating (if available). Concentrations are calculated from the balance of Eligible Outstanding Receivables. All balances due from affiliates of one obligor are consolidated when calculating excess concentrations. USD 900 Reduction of Excess Concentrations The major rating agencies established a recommended methodology to derive advance rates on receivables, which is now generally adopted by the finance community. 1 - (15%) - (5%) = 80% Advance Rate = 1 (Loss + Dilution Reserves %) (Yield + Fee Reserve in %) Deriving the advance rate depends on the historical performance trends of the receivables pool. The amount of the advance depends on the need for credit enhancement, the level of Reserves required to ensure that there are sufficient collections to repay investors, and the mitigation of excess concentration risk from the portfolio. USD 720 Funding Level Note: If receivable pool performs above the level of the advance rate, additional cash received will be transferred back to originator. 6

Agenda. Overview of Securitization Potential Financing Structure/Case Study NORD/LB at a Glance NORD/LB s Asset Backed Finance Group Contacts 7

NORD/LB at a Glance Represented in important domestic and international financial and trade centers. New York Hamburg London Schwerin Bremen Amsterdam Hannover Braunschweig Magdeburg Düsseldorf Luxemburg Paris Frankfurt Nürnberg Warschau Head offices Hannover, Braunschweig, Magdeburg Branches worldwide London, New York, Singapore, Shanghai German branches Düsseldorf, Hamburg, München, Schwerin and approx. 100 branches of Braunschweigische Landessparkasse Subsidiaries and bank holdings Bremer Landesbank, Deutsche Hypothekenbank, NORD/LB Asset Management, NORD/LB Luxembourg, NORD/LB Covered Finance Bank, NORD/LB Vermögensmanagement München Shanghai Singapore 8

NORD/LB at a Glance NORD/LB in a snapshot. employs over 6,500 people and has earned more than EUR 1 billion for its owners in the last 5 years. ensures the transportation of people and freight with 640 financed aircraft. is with 4,000 small and medium sized corporate customers; the driving force of the North German economy. is the biggest agricultural bank in Germany partner to more than 7,000 businesses and has been ensuring that there is enough food on the table and more for over 170 years. finances wind turbine plants that deliver a total output of 5,000 MW and is therefore enabling the expansion of renewable energies. is present on all of the world s oceans with 1,500 financed ships. is the group bank for the savings banks, and as a savings bank itself is accessible throughout the Braunschweiger Land region to around 400,000 customers with 100 locations.... provides commercial and residential space as the financer of over 5,000 high-quality properties. 9

NORD/LB at a Glance NORD/LB s Shipping Experience. as at 30 Sep 2014 By type of ships Total exposure: 17.3bn NORD/LB s Ship Finance Department Highlights More than 45 years of experience in ship finance Other ships 9% Cruise ships/ ferries 2% Crude oil tankers 4% Product-/chemical and gastankers 13% Bulker 17% Offshore Vessels 4% Multi-Purpose 15% Feeder to Subpanamax (Containers, < 3K TEU) 21% Panamax (Containers, 3-5K TEU) 7% Postpanamax (Containers, >5K TEU) 8% TEU = Twenty-foot Equivalent Unit; measure for the capacity of container ships and port handling volumes. 3K TEU = 3.000 Twenty-Foot Equivalent Units Offering individual and tailor-made solutions in the segment ship finance worldwide. Expertise and know-how to support customers in all areas of shipping finance: from structuring, interestrate and currency hedging by ECA-covered financing to alternative finance like promissory notes and securitizations. Offering services like out-flagging of ships or M&A consultancy In recent years, increased product range is being offered by including warehouse facilities, operatinglease and pre-delivery financing. Offered Products: financing of cargo and multipurpose vessels resp. offshore oil & gas 10

NORD/LB s Asset Backed Finance Department Overview. 1 NORD/LB established an asset backed finance team ( ABF team ) in 2000. The ABF team is comprised of experienced multilingual practitioners in asset backed finance. 2 NORD/LB ABF s core strength lies in structuring transactions supporting customers in countries and currencies they need for their on-going business. 3 NORD/LB ABF funds asset pools geographically diversified among Europe, the United States, South America, Australia and Asia. 4 NORD/LB ABF acted as lead manager, arranger or participant in 4 shipping transactions financing trade receivables with multiple jurisdictions and currencies. 5 Transaction size can range from USD 25 MM to USD 250 MM. Our main directive is to provide financing to European companies, or to companies serving the shipping and aircraft markets worldwide. 12

NORD/LB s Asset Backed Finance Department ABF business model: We fund a diverse selection of customers. Target Asset Classes ABF focuses primarily on core asset classes for which it has experience and that have performed well throughout the past years Asset Classes include lease receivables (including auto leases and equipment leases), auto loan receivables, freight rate receivables and consumer loans receivables NORD/LB ABF s Commitments as of End of April 2015 Consumer Loans 3.48% Insured Loans 8.12% EUR 2.5BN Commitments Target Customers European and German corporates as well as financial institutions that are key customers of the bank Customers of the core segment, such as shipping liners and airlines Selectively opportunistic customers which are not key or target customers of the bank Trade Receivables 57.62% Auto Loans/Leases 30.79% Business Model Overall the business model is and continues as a customer focused business 13

NORD/LB s Asset Backed Finance Department The ABF team has a long and successful track record in providing customized solutions. $1,050,000,000 Trade Receivables Securitization International Shipping Multi Jurisdiction and Multi Currency $125,000,000 Trade Receivables Securitization Int l Construction & Manufacturing Single Jurisdiction and Single Currency $125,000,000 Trade Receivables Securitization Automotive Components Single Jurisdiction and Single Currency Sole Arranger/Syndicator Sole Arranger Participant $150,000,000 Trade Receivables Securitization International Shipping Multi Jurisdiction and Multi Currency $150,000,000 Trade Receivables Securitization Airline Cargo Multi Jurisdiction and Multi Currency $100,000,000 Trade Receivables Securitization International Shipping Multi Jurisdiction and Multi Currency Sole Arranger/Syndicator Sole Arranger/Agent Co-Purchaser/Syndicator Transaction Details Receivables denominated in different currencies (CNY, EUR, USD, GBP, AUD, NOK etc.) Credit enhancement is structured to the AA or AAA -level and is dynamic, adjusting to reflect on-going portfolio credit performance Obligors are highly diverse and geographically dispersed 14

NORD/LB Contacts. NORD/LB New York Branch Asset Backed Finance Group 1114 Avenue of the Americas, 20 th Floor New York, NY 10036 Bitte hier Ihr Foto einfügen Edward Weber Managing Director +1 (212) 812-6949 Edward.Weber@nordlb.com Anthony Brown Senior Director +1 (212) 812-6952 Anthony.Brown@nordlb.com Frank Tallerico Senior Director +1 (212) 812-6983 Frank.Tallerico@nordlb.com Heruy Dawit Director +1 (212) 812-6882 Heruy.Dawit@nordlb.com Simone Daeschner-Guse Associate Director +1 (212) 812-6846 Simone.daeschner-guse@nordlb.com Mirja Knoechelmann Associate +1 (212) 812-6950 Mirja.Knoechelmann@nordlb.com Juliane Kaden-Brotha Associate Director +1 (212) 812-6973 Juliane.Kaden-Brotha@nordlb.com David Li Analyst +1 (212) 812-6901 David.li@nordlb.com Alex Yergey Analyst +1 (212) 812-6878 Alexander.yergey@nordlb.com 16