The deal will allow capital market investors to invest in ‘invoice discounting' and take indirect exposure to corporate Anchors
CredAble with Northern Arc Capital has announced the closure of the securitisation of a pool of trade receivable loans. The Securitisation is backed by approved trade receivable invoices with Multi Anchor – Multi Vendor PERSEC Reserve Bank of India securitisation structure.
Securitisation is the financial practice of pooling multiple kinds of contractual debt, such as home mortgages, commercial mortgages, auto loans, micro, small and medium enterprise (MSME) loans or credit card debt obligations and selling their affiliated cash flows as securities, which may be alluded to as bonds, pass-through securities, or collateralised debt obligations, to third party investors (CDOs).
Today, several smaller businesses tend to face greater difficulties in accessing credit than their larger counterparts. The securitisation structure will allow vendors (mostly MSMEs) of large buyers, to discount their invoices and bridge the working capital gap, said the company.
“The structure will open the short-term supply chain financing asset class to capital market investors, as well as non-traditional investors, ultra-high net worth individuals (UHNIs) and foreign portfolio investment (FPIs). We now have the potential to unlock working capital for the entire value chain of our enterprise clients, on both the payables and receivables side, covering suppliers, sub-vendors of their suppliers, distributors, dealers, and retailers,” said Ram Kewalramani, co-founder and managing director (MD), CredAble.
The pool of loans is a sales invoice discounting facility including both (anchors-led financing as well as vendor-led financing programs) by CredAble non-banking financial companies (NBFC) and has been assigned subject to eligibility criteria being complied among the originator, investor, and trustee.
On account of the short-term nature of underlying assets, the transaction was structured to undertake replenishment and thus collections from the securitized asset pool can be utilized to purchase additional loans from CredAble NBFC after paying interest to investors on the pass-through certificates (PTCs) on the scheduled payout dates for the first three months.
Post the replenishment period, the transaction will start amortising as per the prescribed waterfall.
The securitisation will allow capital market investors to invest in a new asset class namely, “invoice discounting” and take indirect exposure to high-quality corporate Anchors from whom trade receivables are due. Securitisation of this asset class can further contribute towards priority sector lending (PSL) assets outstanding for bank investors, as most of these borrowers (vendors or suppliers) are Udyam certificate holders.
Established in March 2017 by Nirav Choksi and Ram Kewalramani, CredAble is backed by investors such as Oaks Asset Management, Plutus Wealth Management LLP and Axis Bank Limited, the company was granted NBFC (BBB Stable) license by RBI in 2019 and offers post invoice discounting and other working capital finance products.