Case study: Meridian VAT

  • 01 Jun 1998
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ONLY TWO THINGS ARE CERTAIN IN LIFE, goes the old saw, death and taxes. And if funeral receipts have yet to come to market, taxes and securitisation are no strangers. Greenwich NatWest introduced a new asset class in June, when it arranged a securitisation of VAT receivables.
The $100m CP facility was launched for Meridian VAT Reclaim, a Dublin-based company which claims VAT levied by EU tax authorities for clients worldwide.
With 38 offices in 23 countries, Meridian is by far the largest VAT recovery concern in the world; the company bundles up invoices from clients and makes claims every quarter from each of the EU's tax authorities.
Typically, Meridian clients have to wait between six and nine months for the authorities to pay; the company is now offering to prepay client claims on the French, German and UK authorities.
Those prepayments will be funded in the CP markets by Greenwich NatWest's TAGS multi-seller CP conduit.
TAGS will issue CP at maturities of one or two months, with a 100% liquidity facility provided by NatWest. The underlying claims are ultimately government obligations, and any invalid claims are catered for by overcollateralisation.
A further level of credit enhancement is provided by a TAGS programme-wide cash collateral account of 5%.
The assets are purchased by TAGS at a discount to create a synthetic interest stream, which is hedged back to floating rate by an interest rate cap.
As TAGS charges Meridian a smaller discount than it charges its clients, the company is able to take some of its collection fee upfront, rather than waiting for all of it until the claims are paid.

  • 01 Jun 1998

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