In an effort to help companies get short-term funding, yesterday, NYSE Euronext Inc. (NYX) announced the acquisition of a small stake in The Receivables Exchange (TRE). TRE is a leading and first online marketplace in the US for selling debts and other obligations owed by customers, known as accounts receivables.
TRE generally deals with the small and medium business market. However, the terms of the deal, such as quantity of stake and pricing remain undisclosed.
The acquisition of the minority stake is part of the strategic alliance between NYSE and TRE, whereby the latter’s corporate account receivables will be marketed to potential sellers, including the companies listed on NYSE. This will be done through a Corporate Receivables Program (CRP).
The acquisition and initiation of CRP will help NSYE tap into the $17 trillion accounts receivables market, thereby expanding the company’s growing portfolio of issuer services. NYSE is likely to gain from the technical sophistication, practicality and operational benefits of the CRP program.
Besides, the joint strategic initiative with TRE is also expected to be a unique capital efficient mechanism, which is particularly significant during times of market volatility when access to credit facilities reduces substantially.
Through CRP, companies can achieve a cost-efficient tool to leverage receivables for liquidity and balance sheet management in an effort to improve their returns on assets and equity. On the flip side, association with the leading exchange will also boost TRE’s market presence.
Overall, we believe that NYSE’s strategic business initiatives including the ongoing proposed merger with Deutsche Bourse will not only strengthen its market position but also help mitigate competition, pricing, volume, currency and operating risks in the long run.
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