Research On The Motivation And Financing Effect Of Asset Securitization Of Retail Enterprises

Asset-backed Securities has been developing rapidly in China Since 2014,and various industries have started to try this new financing model.In response to the impact of consumer upgrading and the overall economic slowdown,the retail industry has started to raise sufficient funds for strategic transformation and upgrading,and Asset-backed Securities has thus become a new financing option for the retail industry.Based on the above background,the Rainbow Department Store(Phase I)Asset-Backed Special Program was successfully issued in 2015.As one of the first retail companies to implement Asset-backed Securities,the results achieved have significant implications for the retail industry.Through the case analysis method,this paper takes Rainbow Department Store as the research object,analyzes the motivation of choosing Asset-backed Securities,and evaluates the effect after its implementation.First,this paper uses PEST analysis to explore the external reasons,and then analyses the internal reasons based on Rainbow Department Store’s own needs,concluding that the external reasons are: the liberalization of regulatory policies has promoted the development of securitization;macroeconomic downturn has led to financing difficulties,requiring securitization to achieve efficient financing;social consumption patterns have changed and securitization can provide funding for the transformation of enterprises;During the transition period,enterprises have higher technical requirements for e-commerce,requiring sufficient and sustained capital to invest in technology.The internal reasons include: During the transformation period,the company’s profit has not been able to grow continuously and the return on assets has not been improved,so it needs capital to support the company to complete the business and structural transformation thoroughly;the enterprises mainly relies on commercial credit facility financing,which has a single and unstable financing structure and needs to be improved;the monthly closing price continues to fall,and asset securitization can send positive signals and improve the share price.Second,this paper evaluates the effectiveness of its implementation in terms of four aspects: cost,benefit,financial indicators,and risk through the comparative analysis method and the event study method.Using the cost of capital formula,it is calculated that the cost of securitization is lower than the cost of traditional financing,due to the lower interest expense,information cost and management cost of securitization.By the event study method it is concluded that the yield of Rainbow Department Store has been improved after Asset-backed Securities,because the securitization adds value to the original assets,optimizes the debt structure and increases the value of the business.By comparing and analyzing the four major capabilities of Rainbow Department Store before and after asset securitization,it is found that the relevant capability indicators have improved after the implementation;after calculating the Z value,it is found that the operating risk of the enterprise has also been reduced,However,there will still be potential risks such as interest rate and income fluctuations.Based on the successful experience of Asset-backed Securities in Rainbow Department Store,this paper puts forward the following suggestions for other retail enterprises: control the quality of special assets to ensure stable cash flows;reasonably design the credit enhancement structure and set the proportion of subordinated securities;and establish a sound risk warning and default handling mechanism.