Supply Chain Finance: Structuring and Documenting Approved Payables Financing Transactions

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Thursday, September 10, 2020

Recorded event now available

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Program Materials

This CLE webinar will provide banking and loan counsel with guidance for structuring and documenting a supply chain finance (SCF) facility. The panel will discuss their insights, including the pros and cons of this alternative payment structure, as well as critical issues for buyers, suppliers, and investors.

Description

In seeking new ways of managing their balance sheets, companies with stable credit have found the extension of payment schedules on accounts payable can improve their cash flow and working capital. An SCF transaction facilitates timely payment by a third party to a company's supplier while extending the time which the company has to make payment. The investor earns income because it pays the supplier's invoice at a discount and then collects 100% from the company at maturity.

There are structural issues associated with SCF, which counsel must address upfront. These include whether the supplier's participation will be limited by competing credit agreements, how changes in interest rates or the company's credit rating might impact the transaction, how to treat the facility for accounting purposes, and whether the deal will be regarded as "true sale" for bankruptcy purposes.

Listen as our authoritative panel discusses the structural issues and key documents required in an SCF. The panel will also discuss the pros and cons of these transactions for buyers and suppliers, how SCF differs from factoring, the advantages of using SCF in cross-border transactions, and recent trends in SCF products.

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Outline

  1. Economics of a supply chain finance facility: benefits for supplier, buyer, investor
  2. Structuring issues
    1. Competing loan obligations of supplier and buyer
    2. Interest rate fluctuations; buyer credit strength
    3. Accounting treatment
    4. Bankruptcy treatment: "true sale"
    5. Blockchain
  3. Transaction documentation
    1. Paying services agreement
    2. Receivables purchase agreement
    3. Parent guaranties and other credit support
    4. UCC considerations
  4. SCF in cross-border sales transactions
  5. Current trends and structures; fraud concerns

Benefits

The panel will review these and other key issues:

  • When does SCF benefit both the buyer and its supplier?
  • How does SCF vary from factoring and other invoice and receivables finance transactions?
  • What are some of the key structuring concerns of SCF?
  • How can SCF be used to facilitate cross-border transactions?
  • What are some emerging trends and structures in the SCF space?

Faculty

Martinez, Ricardo
Ricardo (Rick) Martinez

Partner
Hogan Lovells

Mr. Martinez represents lenders and borrowers in complex cross-border finance transactions. His practice covers a broad...  |  Read More

Novetsky, Terry
Terry D. Novetsky

Partner
King & Spalding

Mr. Novetsky represents financial institutions, sponsors and specialty lenders in asset securitization, secured...  |  Read More

Redinger, Mark
Mark S. Redinger

Partner
Dickinson Wright

Mr. Redinger’s practice focuses on corporate finance, mergers and acquisitions, structured finance, derivatives...  |  Read More

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