Factoring

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|Re-factoring programme pour USA - |
|Receivables purchase - protection characteristics|

This document has been elaborated in the framework of @rating Pack international project and is a result of works of protection group which included Coface experts, USA team and AKF expert.

Working group :

|Person |Entity /dept. |
|Joelle-Allain Rouge |Coface/DJ|
|Franz Michel |AKF/Center of excellence for factoring |
|Daniel Boccara , Corine Troncy, |Coface USA |
|Fiedrich Von Krusenstiern, David Venediger | |
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|Jean-Luc Etieve |Coface/CT |
|Eva Dinard |Coface/IMP |
|Jaqueline Oud | |

Product positionning

Thisproduct is aimed at USA factors.

Coface Group has already experience with factors in different countries:
- covering customers of factors with loss payee endorsement to the factor (this is predominant scheme ; it applies very often in France and to Cofacredit which in addition handles management of these contracts)
- covering factors directly - cf. new GA policy aimed at factors (mainly in UK)and GTF debt purchase factoring in India
- having our own factoring companies AKF in Germany (100%) and shares in Cofacredit (36%).

Factors are often organised on domestic markets providing large range of services but have difficulties to develop on international (export corresponds to less than 10% of their total T/O). For export, factors often work with partners reselling their export debtsto "import factor" according to specific conditions.

In USA we have no possibility to sell protection directly to the end customers. Protection contracts are done through CNA fronting with management of negotiations (through agents) and policy handling difficulties that we know.

Coface USA has high level commercial staff in place and they have good relations with factors where they seelarge business potential (see the attached note). From the other hand selling receivables purchase to the end customer would require heavy management which in the case of factor is done directly by him.

For these reasons it has been decided to re-design product initially aimed at end customers to a specific receivables purchase product for factors. It's conditions should be similar to theconditions that factors apply among them in the case of import factoring.

It is proposed to test this product first with selected factors and or banks acting as factors.

II. Product description

Constraints in product design

- the receivables purchase protection needs to be provided by local Coface Group company
include all parameters of regular factoring which are necessary to avoid therisk of the debt purchase qualification as a credit insurance product
make management of the protection as much as possible close to the management of credit insurance (we do not handle the management invoice per invoice, receivable payments, we do not finance them)
make its functioning and wording compatible with cofanet
make protection contract complementary to the service contract in...