Re: what if an originator sells its products to a distributor instead of customers?
by Matt (no login)
It all depends, if the payment obligation to the Seller rests with the regional distibutor then yes, since it is likely that the portfolio would become more concentrated. As such certain receivables would not be eligible for funding since in order to minimise risk the portfolio that is sold to the investors needs to be diversified (in order to get the best price).
If however the regional distributor does not assume the payment obligation i.e. the final customer is obliged to pay directly to the seller/originator then no not really. The exception being were the payments made by the end customer actually flow through the regional distributor. In such a scenario there are increased risks the main one being the risk of the distibutor going into insolvency. Payments made by the end customers via the distributor in such a scenario are subequently lost (leading to a loss for the investors). An arranger would always look to minimise or fully mitigate this risk since it is not likely to be acceptable for investors
Hope this helps
Posted on Apr 26, 2005, 6:49 PM from IP address 160.83.32.14