The assignment of non-performing receivables offers a myriad of benefits for the assignor:
- An alternative source of funding;
- Possibility of greater investments and resources directed toward the assignor’s core business;
- Discount on the sale of the receivables is deductible for income tax and social contributions purposes;
- Reduces the burden associated with collections;
- Exemption of Tax on Financial Operations (aka IOF) when compared to other traditional forms of financing;
- Risk mitigation for the assignor, as assigned receivables are no longer retained on its balance sheet;
- Dynamic concept, that allows alternatives adaptable to the particularities of a segment or transaction.
Examples of a wide range of receivables that can be securitized, subject to the particularities of the legislation regulating each sector:
- Banking (corporate or individual);
- Auto loans (including future flows);
- Government obligations;
- Utilities receivables – telecoms, electric and water utilities;
- Healthcare or education receivables;
- Trade receivables;
- Agribusiness receivables;
- Trade associations;
A summarized overview of a credit assignment transaction
- Potential assignor and assignee sign a non-disclosure agreement –NDA.
- Potential assignor provides data for a pricing preview exercise.
- Potential assignee analyses the data and submitsan indicative offer.
- Following up this offer, if it meets with the potential assignor expectations,the potential assignee moves into the next round of the transaction process which includes a more thorough account of the receivables, including an assessment of the receivables documentation and information concerning eventual collection lawsuits, which may impact the terms of the indicative offer.
- Alongside this assessment exercise, negotiations on the terms and conditions of the credit assignment agreement begin.
- Lastly, the purchase price is confirmed and paid for, and discussionswith the after sales workflow initiate.
In this type of transaction, protecting the integrity of both potential assignor and assignee is crucial, a high level of expertise is essential during, and after the completion of the credit assignment and so are the experience and credentials of the company who will assess, acquire and ultimately manage after sale credit recovery.
In this context, AMC do Brasil delivers stability, trust, and transparency to its commercial partnerships and holds the utmost credibility in the securitization market and the recognitionof its technical and ethical conduct.
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