What is a sophisticated financing arrangement involving the sale of an entity’s long-term receivables in return for cash that requires the inclusion of a special purpose entity (SPE) to properly execute?
A. Repurchase agreement
B. Securitization
C. Securities lending arrangement
D. Factoring arrangement
B. Securitization
Securitization is a sophisticated financing arrangement that involves the sale of an entity’s long-term receivables in return for cash and often requires the inclusion of a special purpose entity (SPE) to properly structure the transaction. In securitization, the entity transfers the risk and reward of the underlying assets to investors by issuing securities backed by those receivables through an SPE.
