ABS-Backup services

ABS for medium-sized companies

In order to improve their cash flow, many companies sell their receivables on the capital market. They use asset-backed securities (ABS). Until now, ABS procedures were only for large customers, due to the high volumes of receivables. Along with the Luxembourg company Lux AG, EOS is providing small and mid-sized companies access to ABS transactions.

How do ABS transactions work?

 

ABS is a financing instrument that works, in principle, like factoring: Companies sell their current and future receivables to a financing entity in order to increase their liquidity. However, while in the case of factoring only small receivables volumes are traded, ABS transactions in general deal with portfolios starting at EUR 25 million. A further difference: ABS are receivables put together into a pool which is then assigned by the company doing the selling to a special purpose entity. This is also called a Special Purpose Vehicle (SPV). It has the task of bundling together the receivables according to quality and due dates, and then of issuing corresponding securities, which are backed by the receivables, onto the capital market. This is how the purchase of the receivables pool is refinanced.

For whom are ABS transactions worthwhile?

This is a worthwhile alternative for companies which have to heavily finance themselves due to the requirements of Basel II by the banks. The services of Lux AG could be an alternative for you if your company has a yearly turnover of more than EUR 15 million and a receivables base of at least EUR 2 million. EOS offers receivables sellers back-up services as part of the co-operation.

The ABS procedure will allow you to find and use new sources of liquidity. This is because the costs are often lower than is the case with other financing instruments, thanks to the capital market conditions.