Is this an example of a Revolver or Structured Finance?

Water Cooler Investing
#1

I am confused about how this kind of debt would be classified. Would it fall under revolving credit facility or Structured Finance? Any discussion would be appreciated.

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Receivables Funding Facility - In the fourth quarter of 2017, Equifax entered into a $225.0 million, two-year receivables funding facility (the “Receivables Facility”), which had an original maturity in 2019. Under the Receivables Facility, Equifax and certain of its U.S. subsidiaries sell the eligible third-party receivables of its U.S. based business, to Equifax Receivables Funding LLC, a consolidated, wholly-owned, bankruptcy-remote subsidiary that may subsequently transfer, without recourse, an undivided interest in these accounts receivable to investors. The investors have no recourse to the Company’s other assets except for customary repurchase, warranty and indemnity claims. Creditors of Equifax do not have recourse to the assets of Equifax Receivables Funding LLC. The Receivables Facility contains standard representations, warranties and covenants made by Equifax and its U.S. subsidiaries in connection with the sale of the receivables, and any repurchase, warranty or indemnity obligations of the U.S. subsidiaries in connection with the sale of the receivables (but no obligations of Equifax Receivables Funding LLC) are guaranteed by Equifax.

#2

It would be most similar to factoring but not with high risk companies as the counter parties

#3

@rawraw

Yes, I did think that it could be a case of receivables factoring. Although, I later believed it may be RCF or structured finance for the following reasons:

  1. Factoring usually (but not always) involves a factoring company in the role of collecting the invoice/receivables. In this case it seems the company has established its own subsidiary to which it transfers its receivables. Also, it mentions that the subsidiary to which it sells its receivables is a bankruptcy-remote subsidiary.

  2. The max limit ($225 M in this case) indicates it might be a RCF. Also, the rates they are paying is something along Libor+Margin, which is more common with lines of credit. Factoring usually works on higher rates.

Although I subsequently found that the company has a separate revolving lines of credit too and so “Receivables Funding Facility” might be a case of debt factoring as you pointed out.

#4

I’m not a pro at this area, but my guess is that is just legal protections. The lower rate would be due to the fact its not a high risk customer. But the dynamics of pledging collateral to get money is likely similar to factoring. That’s my guess