T. Gargour & Fils closes securitization deal

Short term debt arranged by BSEC

BSEC, a financial institution owned by Bank BEMO, has successfully raised just under $6 million for T. Gargour & Fils (TGF), exclusive distributors for Mercedes-Benz, Chrysler, Dodge, and Jeep.

The cash was raised through a securitization fund set up by BSEC. The fund purchased cash generating assets from the car dealer including car loans extended to TGF customers and other receivables. The fund then sells asset-backed six-month bonds on the market to investors.

The first issue raised $5.9 million. The fund will renew the bond issue every six months at different coupon rates for a five-year period.

“We have designed the structure in a way to make it flexible for both (TGF) and the investor. On the one hand, it offers TGF revolving financing to accompany their business growth, and on the other it provides investors with a short term paper in line with the current market demand,” said Ronald Yazbeck, general manager of BSEC.

BSEC has set up similar funds for other local car dealerships and car rental agencies, among these Bassoul & Heneine, Rymco, and Avis, said Roula Sleiman, director of Investment Banking Group at BSEC. “This is an alternative financing tool that decreases companies’ reliance on banks, it uses their assets to raise funds, and does not increase their liabilities,” Sleiman said.

Investors are paid a fixed coupon. Every six month the coupon rate is reset and investors have the option to renew or to exit the investment. Securitizations funds raise money through the capital markets which allows companies to sell their risk as well.

“TGF has solid relationships with over 18 local banks. However, the securitization proved to be an important tool for us. It adds a lot of value to our business since not only does it help us finance our commercial vehicles sales business, but it also allows us also to grow our credit portfolio in an orderly manner,” said Robert Khabbaz, CFO and board member for the TGF group.

The fund was set up under the provisions of the securitization law and was authorized by the Central Bank.