Exchange Traded Receivables as an alternative to low deposit rates?

It is irresponsible to even mention an investment like this alongside a cash deposit. Unfortunately the hunt for yield will motivate many people to take on an inappropriate level of risk.
 
I just had a look at the IT article referred to above.

The explanation of how ETR works is complete rubbish.

The italics are quotes from the Irish Times article.

The ABCs of ETRs: How they work Company XYZ owes Company ABC Ltd €105,000 for goods and services. When ABC goes to XYZ for payment of the invoice, XYZ offers two options: 1) pay it in full in three months’ time or, 2) pay €100,000, a discount of €5,000, now.

NO. The terms of payment for an invoice are set by the supplier not the purchaser.

ABC decides to take the €100,000 now rather than wait three months to get paid in full.

Now XYZ has to get the €100,000 to pay ABC to clear the invoice in full.

Rather than paying this out of its own funds, it goes to the Debtors Exchange trading platform where the invoice will be purchased from XYZ. This means that Debtors Exchange will give XYZ €100,000 now so that they can pay ABC.

NO. XYZ does not own the invoice and therefore cannot sell it. The supplier owns the invoice not the purchaser.

Three months later, XYZ will repay Debtors Exchange €105,000. For XYZ, this approach allows them to buy credit at a much cheaper rate than an overdraft or a bank loan.

That makes no commercial sense. There is no way that this could be cheaper than bank finance.

For Debtors Exchange, it earns them a return of €5,000, or 5 per cent, on the €100,000.

But where does Debtors Exchange get the €100,000?

This comes from the investors, with Debtors Exchange negotiating a rate and term with financial advisors.

Costello & Tarpey, for example, offers a rate of 3.75 per cent for one year for its customers.


Invoice financing arrangements are with the supplier not the purchaser. This is because the supplier owns the asset.

Someone at the IT does not know what they are talking about. I wonder if I could get a job there writing about sport or maybe music?
 
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Hello I have money on deposit in KBC earning virtually nothing after dirt and was introduced to Exchange Traded Receivables as a 100% capital guarantee 100% yield guarantee alternative to bank accounts. The risk is underwritten by AIG so I'm told there is no risk unless AIG go bust. The rate is about 2.5% on €20,000 for one year and it is GCT but first €1,270 is exempt. Is it too good to be true? Are there other risks I'm not seeing? Anybody heard of creddebt exchange
 
Its invoice factoring. I found a company offering 3.25%, also insured by AIG with Dansk as the cash holder. The taxing under CGT rules is an advantage.

They do seem to have insured against the obvious risks but I would not describe it as risk free!

Possible risks would be fraud at the company actually operating the scheme (I dont know anything about them). Also its unclear if there might be currency exchange risks, for example if they lent money in sterling and on being paid back its worth less in euros (no mention of this being insured or hedged against). And can you be sure that the operators always comply with the terms of their insurance, for example...

In the advert that I found, they have hypothetical examples of companies such as CocaCola or Vodafone using this service. I very much doubt that companies like this are factoring their invoices through these operators, so thats another red flag.
 
If it's legit and risk-free, then it might be useful for people who have big CGT losses going forward.

Don't forget that AIG itself nearly went bust. But then so did many of the banks.

Brendan
 
Moneytalks said:
Hello I have money on deposit in KBC earning virtually nothing after dirt and was introduced to Exchange Traded Receivables as a 100% capital guarantee 100% yield guarantee alternative to bank accounts. The risk is underwritten by AIG so I'm told there is no risk unless AIG go bust. The rate is about 2.5% on €20,000 for one year and it is GCT but first €1,270 is exempt. Is it too good to be true? Are there other risks I'm not seeing? Anybody heard of creddebt exchange
Click to expand...

No matter how it is dressed up, if you are being offered a higher rate of return than your deposit account then you are taking on a higher than before. Clearly you do not understand the nature of this product and so you should avoid it like the plague.

This is securitization of subprime debt plain and simple, nothing else and the objective for the provider is simple - get as much of this debt of their books and in the hands of investors as quickly as possible before the music stops. Here is how it works, the provided will buy a large block of debt, in this case receivables, it classifies the debt according to collectibility and places the top grades privately. The rest it needs to sell to the public, but it needs a bit of credibility and that's where an insurance company and it's guarantee comes in. No one is looking out for you in this deal but you....

There are plenty of normal investment products out there without getting involved in this kind of stuff.
 
Hello,

Just wondering did anyone ever proceed with this type of "investment" and if so, what has the experience been like to date ?

Many thanks,
 
MrEarl said:
Just wondering did anyone ever proceed with this type of "investment" and if so, what has the experience been like to date ?
Click to expand...

From which side? Provider ;-) or Client. If provider, then outcome was about -$40b
 
Does anyone know the basis on which the IT article in the first post claims this is taxed as Capital Gains? The UK company marketinvoice.com mentioned in the article says in its material that income for UK investors is taxed as interest income. Anyone know what legislation would cover this for Irish investors?
 
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