AztecMoney provides Emerging Market receivable play for Investors

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Aztec Exchange is an online platform launched in May 2013 to enable SMEs in emerging markets and credit-constrained developed markets, particularly in Europe, to sell invoices that they have issued to large foreign companies and their local subsidiaries. Aztec, which was set up by Oliver Gabbay and Edwin Hagan-Emmin, is based in Dublin and currently has 30 full-time staff.

I recently spoke with Aztec Exchange cofounder Oliver Gabbay to understand more about what Aztec is doing to help suppliers, particularly in emerging markets, and learn more about how the Exchange is going.

David: why did you set up the company?

Oliver: The rationale for setting up the company came from gaps my partner and I saw in the market. I come from a securitization and finance background and my business partner is from Morgan Stanley, having done proprietary trading of different asset classes. It was clear to both of us post-credit crisis capital has become more conservatively deployed and more expensive.

David: Where are you guys today?

Oliver: We are a young company. In 2012 and 2013, we built systems, and the beginning of last year we tested our system and got through proof of concept. We have Aztec Exchange, which is our corporate name and Aztec Money, which is our portal with our trade suppliers. We run the system on two platforms, one is for Investors. Aztec Money is run in 20 different languages and is a cloud hosted system.

We run a more modular based system. For large companies and supply chain finance, rather than dictate to them how they have to change their system to interlink with us, we will make the necessary amendments to receive data and the file and not disturb the status quo.

We have registered over 200 suppliers to sell invoices on our platform since going live in June 2013 and we have capacity for US$30 billion of trade receivables annually. In addition, we are engaged with a handful of global corporations to help their suppliers’ access working capital as part of supply-chain financing programs.

David: what product offering do you have?

Oliver: We have some common things predicated on extending financing of the supply chain further than the current capital deployed is going. We think of it in a peer to peer sense, an institutional platform that allows the individual transactions trading relationship to be uploaded for finance. It may appear once and never again, adhoc, or repeated.

We then have supply chain finance solutions; these are corporate projects where we can offer our services to companies and deploy our technology into their supply chain, the parts that are not getting full coverage at the moment. And then work in partnership even with the existing financiers of that supply chain.

We combine this with a network of investors and banks, predicated on us providing an interlinking technology portal with the correct processing. Look at the U.S. market, it is not uncommon to outsource your mortgage servicing, generally trade financing is kept in-house.

David: How do investors buy invoices off the platform?  Is there a time limit?  Is it like a true auction?

Aztec: Investors can buy invoices during the auction opening time. Via the Aztec auction a seller can receive incrementally higher bids on their invoice sale. The winning bidder is always the highest final bid; all investors must bid within the ranges that seller selected for his invoice sale.

David:   What counterparty information is available on the seller to investors? and what due diligence needs to be done?

Aztec: Aztec is transparent and investors can review all seller on-boarding and transaction documentation. Aztec can assist with any further information requirements from investors.

Our processing team undertakes KYC on suppliers and they validate that the invoice is valid.  Invoices are acquired on a true sale basis (not lending) and so investors’ primary concern is the credit quality of the trade debtor in the transaction, for which 3rd party independent credit reports are available to supplement the investors’ own analysis.

David:  Is there an opportunity for multiple investors to co-own the receivable?

Aztec : Aztec does not syndicate its invoices, there is only a single winning bidder who owns the receivable.

With the recent news that Aztec has signed agreements with Hedge funds in the US, UK and Singapore to buy trade receivable assets off their portal, they have greatly increased their potential capacity to fund suppliers in different jurisdictions and has certainly raised their profile as one of the few vendors that can provide flow to very thirsty investors looking for trade receivable yields, particularly emerging market.

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