Securitization Case Study

Case Study 1 Paper and Packaging Manufacturer Saves 4m: Trade Receivables Securitization and Asset Based Lending
Owing to its global reputation for receivables financing and asset based lending in the form of trade receivables securitization, Demica was appointed to work with one of Europes largest manufacturers in the paper and packaging industry.The client was acquired by a leading US private equity firm in the largest buy-out to date in Irish corporate history.One of Europes most complex, the buy-out fundamentally changed the financial structure of the business. The incumbent management team, together with the new private equity owners, immediately focused their efforts on minimising interest costs and paying down senior debt to reduce debt amortisation pressure. Demica worked with the client to pave the way for the 260 million trade receivables securitization, in the form of a 7-year Medium Term Note (MTN) receivables financing transaction. The client is saving 4 million in annual interest costs through the sale of receivables. In addition, receivables financing allowed the client to repay a major tranche of senior debt, transforming the risk profile of the groups post-LBO balance sheet. Demica consultants worked with the clients management team and their lawyers to analyse the 800 million global receivables book in order to assess the financial, operational, legal and tax issues that would define the structure of the transaction. Based on the stringent invoice eligibility criteria for an AAA rated transaction and the legal considerations in certain jurisdictions, the sale of receivables transaction ultimately included invoices that represented 32.5% of the global trade receivables book. Specialist technical skills were required to centralise invoice tracking across multiple jurisdictions. Following a review of software systems available in the market, Demicas proprietary technology Citadel was selected as the optimal solution to run both the securitization transaction and the existing invoice discounting programme. Continued management of the client's internal invoice discounting programme systems was a key client requirement. Also critically important was the integration of disparate IT systems across multiple operating companies. Citadel's asset based lending and trade receivables securitization solution fulfilled all of our clients requirements. Demica worked with the client, its investment bank and their lawyers to finalise the financial structure of the sale of receivables deal. The issue was heavily oversubscribed and priced at 45 basis points times over libor. Although the primary motivation of the client was to facilitate the trade receivables securitization transaction, they now have the flexibility to include additional companies into their invoice discounting programme and also achieve tighter control over their internal credit management function thanks to receivables financing.

Case Study 2

Ardagh Group: Multi-Jurisdictional Trade Receivables Securitzation Programme

Ardagh Group is a global leader in packaging solutions, operating 100 facilities in metal, glass and associated technology businesses across 25 countries, with an 18,000-strong workforce. It produces in the region of 32 billion containers a year and has revenues of approximately 4.5 billion. Ardagh selected Demica's Citadel platform in 2011 as the ideal solution to run its cross-border securitization facility.It had to support Ardagh and its financing bank with automated collection, real-time reporting and maintenance of data on a daily basis. After approximately half a year of preparation work, the trade receivables securitization programme was launched on 1 March 2012, with Italy and Ireland being the first two countries on board. This facility is expected to grow further to include at least seven more European countries, including France, Germany, Netherlands and the UK, by the end of 2013. Karen Butler, Group Corporate Finance and Treasury Director, notes: " Demica's Citadel platform is very user-friendly. Despite the volume of information it processes and its breadth of functionalities, the navigation is fast and simple. The platform has been fully parameterised and configured according to the specific needs of our company as well as our financing bank. Clearly, in a multi-jurisdictional receivables securitization programme, there are financial, operational, legal and tax issues that need to be taken into careful consideration.With their expertise and technology, Demica consultants have created a tailored programme with customised reporting for us that ensures strict regulatory and market compliance. "Citadel has enabled us to do multi-region reporting and with its wide scope of capabilities, there is a huge potential for us to leverage the information on the platform to improve our internal business processes and introduce new efficiencies to our financing structure. The programme has been running smoothly since the launch and its administration requires minimum effort from us. Not only has the platform increased financial transparency within our company, it has also simplified many internal processes, saving us maintenance and workload costs."

Case Study 3 LBBW: Trade Receivables Securitization for the Mittelstand

Landesbank Baden-Wurttemberg (LBBW) is one of Germany's largest international commercial banks, with total assets of around 374 billion and some 13,000 employees. LBBW has a strategic focus on business services, a well-known specialisation amongst medium-sized enterprises. In 2002 LBBW was seeking an effective trade receivables securitization solution for its

Mittelstand (medium-sized enterprise) customers. Asset Backed Securitization remains largely the province of large enterprises and it is still an exception - in Europe - for it to be offered in its traditional form to medium-sized companies. To support its Mittelstand customers with an additional financing channel, LBBW developed a slim-line ABS solution especially for this market, ABS Kompakt. Firms are offered a trade receivables securitization facility from an eligible invoice volume of 20 million upwards. The service provides all that is needed, from deal structuring, through an automated submission and monitoring platform, to correct contract documentation. Sascha Chevalier, Executive Director Securitizations, comments: "Following a review of available software systems to automate, manage, process and report ABS Kompakt, LBBW selected Demica's technology platform Citadel as the optimal solution to run trade receivables securitization transactions. Since the first transaction in 2002, LBBW has been experiencing steady growth and has already structured many transactions for its Mittelstand clients, whose annual turnover ranges from 100 million to 1 billion. With Demica's support, LBBW continues to optimise and enhance the platform. For instance, the service is flexible enough to accommodate customers whose business circumstances require highly specialised parameters and reporting metrics. The Mittelstand community would find it virtually impossible to construct a trade receivables securitization solution, not least because of the stringent IT capabilities needed to manage and report a receivables securitization. With a highly capable platform, LBBW offers a one-stop shop solution to its clients, reducing the complexity and administrative burden associated with the sale of receivables and securitization transactions and making the whole process much more efficient, cost-effective and manageable for its Mittlelstand customers. "Trade receivables securitization requires a superior management of the asset portfolio, thus a robust IT system is an absolute prerequisite for the effective monitoring of receivables. Demica's Citadel plaform has enabled us to provide our clients with an automated system, with easy ledger entry that massively reduces the ongoing administrative burden of running such a programme on our clients' side. By having the system under our control, we have an intimate insight into our clients' businesses and can provide a line of finance even to clients whose rating might otherwise cap their access to credit. Real-time delivery and item level reporting of data not only allow us to conduct stringent monitoring and evaluation of receivables of our multiple clients; they also enable us to identify any hidden problem transaction in aggregate reporting. Close, immediate monitoring is the key to operational risk management and mitigation."

Case Study 4 B2B Group: Comprehensive Performance History

Demica led a project for a global value-added business-to-business distribution services group that operates across the electrical materials, safey and other MRO (Maintenance Repair and Operations) business sectors in Europe, North America and Asia Pacific. In these diverse and complex markets, our client co-ordinates product and information flows, adding value and

providing significant cost savings to end-users and suppliers. To meet our client's requirements, Demica provided ASP (a secure communications production environment) to support the delivery of real-time reporting of the data required for the execution of a trade receivables securitization. Rigorous testing of the environment occurred prior to the live transaction date to ensure the reported data was accurate, complete and provided within specified timeframes. For the initial phase of the project, Demica successfully delivered a detailed, open-item level analysis of all invoice data from each seller entity for an agreed period. This phase included reporting on metrics of specific criteria, including roll-forward items, ageing, concentration, dilutions, credit terms, write offs and recovery items. Phase 2 involved the ongoing collection of weekly data from the 11 participating operating companies in the securitization programme. This phase provided key additional data which, when combined with data from Phase 1, enabled the client to present a sufficiently comprehensive performance history of its trade receivables to its nominated arranger bank, paving the way for the trade receivables securitization transaction to proceed. Testing occurred across all aspects of the data collection and reporting process, via the Citadel ASP sale of receivables solution. This was crucial to ensuring that the entire process was in accordance with the agreed transaction parameters. As our client had a well established internal factoring programme between a group of sellers and one of their international divisions, it was imperative that the Citadel ASP configuration would be set up to facilitate the requirements of the internal factoring programme. Demica provided the client with a fully parameterised and configured Citadel ASP solution, enabling the clients to access all required reporting metrics, avoiding the burden of on-site software installation, integration issues and maintenance workload and costs. Once the reporting was live, Demica's ongoing obligation to the client is the continued provision of the mandatory reports required to fulfil the contractual duty of a securitization transaction.

Case Study 5 Facility Service Provider: Demica Creates Refined Financing Structure
One of the world's largest facility service providers successfully introduced major new efficiencies to its financing structure, with trade receivables securitization playing a pivotal role. With a market presence in over 60 coountries across five continents, the company was keen to reduce its costs and accelerate its growth as the global economic recovery took hold. The client embarked on a refinancing exercise which sought to establish a diversified facility, embracing senior debt, bonds and trade receivables securitization. As part of the refinancing, the Group launched a trade receivables securitization programme in five major European countries initially, followed by another five the following year. With its Citadel platform, Demica brought the expertise and technology for automating the processes that underpin the company's administrative responsibilities in the transaction, making the administration of the programme as

effort-free as possible, whilst ensuring that all elements of compliance were strictly adhered to. The company's order-to-cash processes were well developed, but setting up the programme delivered further process insights which were used not only to streamline data flows in the set-up stage, but also provided ongoing elements of financial transparency for the company. Helped by the ease of use of Demica's platform, the client was able to capitalise on its trade debt assets to gain access to a relatively low cost, low volatile source of finance and the rewards were greatly advantageous to the clien