The European market for trade receivables securitization is experiencing steady growth, and current macroeconomic conditions, particularly persistently high-interest rates, should promote its further development, including in Poland, according to experts from the law firm DLA Piper.
As stated in the latest report from the Association for Financial Markets in Europe (AFME), the value of the private securitization market in Europe reached approximately 196 billion euros at the end of 2022. Trade receivables securitizations (TRS) had the largest market share. They accounted for more than half of the market, with their annual growth rate at the end of 2022 being around 13%, according to AFME data. Another significant market segment was securitizations secured by receivables from car loan and leasing repayments.
“-These analyses confirm that TRS are a very good source of financing for companies with a large portfolio of healthy, rotating receivables.” – says Paweł Turek, counsel in the financial markets, infrastructure projects, and restructuring team at DLA Piper in Warsaw. “-They can also be a response to the difficulties associated with current macroeconomic conditions.”
Trade receivables securitization allows companies to raise capital by converting receivables into securities that become tradeable. According to DLA Piper experts, TRS can be particularly attractive for companies planning dynamic growth, also through acquisitions, as they allow for significantly greater financing than their balance sheet indicates (net debt / EBITDA). They can also address companies with an investment rating worse than their receivables portfolio. It is also a form of long-term financing, which is particularly important in times of economic turmoil.
“-The development of the Polish TRS market can be facilitated by turmoil in the capital markets and persistently high-interest rates, which limit companies’ access to capital.” – adds Bartosz Matusik, a partner heading the tax practice at DLA Piper’s Warsaw office. “- Forecasts suggest that the number of TRS transactions will increase. This trend is understandable considering the benefits that issuers can gain from these transactions. ”
DLA Piper experts also pay attention to the importance of the regulation by the European Parliament and the EU Council regulating the securitization market, known as SECR. It came into force on January 1, 2019, and established a uniform legal framework for all types of securitization and requirements related to, among other things, due diligence, risk retention, and transparency.
Thanks to the regulation, securitization is the first financial product with a uniform regulation applicable in all EU countries. – adds Paweł Turek. – The regulation is very detailed and the requirements are rigorous, which increases investor confidence, and thus interest in securitization.
According to DLA Piper representatives, the next step in market development will be conducting public securitization transactions.
