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12. TRADE RECEIVABLES SECURTIZATION PROGRAMS
In January 2010, Bunge adopted a FASB issued standard that resulted in amounts outstanding under its then existing securitization programs being accounted for as secured borrowings and reflected as short-term debt on its consolidated balance sheet. As a result of this change in accounting standards, Bunge significantly reduced its utilization of these programs and either terminated or allowed them to expire during 2010.
On June 1, 2011, Bunge and certain of its subsidiaries entered into a U.S.$700 million trade receivables securitization program (the “Program”) with a financial institution, as administrative agent, and certain commercial paper conduit purchasers and committed purchasers (collectively, the “Purchasers”). The securitization program is designed to enhance Bunge’s financial flexibility by providing an additional source of liquidity for its operations. In connection with the securitization program, certain of Bunge’s U.S. and non U.S. subsidiaries that originate trade receivables may sell eligible receivables in their entirety on a revolving basis to a consolidated bankruptcy remote special purpose entity, Bunge Securitization B.V. (BSBV) formed under the laws of The Netherlands. BSBV in turn sells such purchased trade receivables to the administrative agent (acting on behalf of the Purchasers) pursuant to a receivables transfer agreement. In connection with these sales of accounts receivable, Bunge receives a portion of the proceeds up front and an additional amount upon the collection of the underlying receivables (a deferred purchase price), which is expected to be generally between 10 and 15 percent of the aggregate amount of receivables sold through the program.
Bunge Finance B.V. (BFBV), a wholly owned subsidiary of Bunge, acts as master servicer, responsible for servicing and collecting the accounts receivable for the securitization program. The securitization program terminates on June 1, 2016. However, each committed purchaser’s commitment to fund trade receivables under the securitization program will terminate on May 31, 2012 unless extended for additional 364-day periods in accordance with the terms of the receivables transfer agreement. The trade receivables sold under the securitization program are subject to specified eligibility criteria, including eligible currencies and country and obligor concentration limits. BSBV purchases trade receivables from the originating Bunge subsidiaries using (i) proceeds from the sale of receivables to the administrative agent, (ii) collections of the deferred purchase price and (iii) borrowings from BFBV under a revolving subordinated loan facility.
As of June 30, 2011, $520 million of receivables sold under the Program were derecognized from Bunge’s condensed consolidated balance sheet. Proceeds received in cash from transfers of receivables to the Purchasers totaled $401 million. Gross receivables sold under the program since its inception in June 2011 were approximately $840 million. These sales resulted in a discount of less than $1 million for both the three and six months ended June 30, 2011. Collections of previously sold receivables, including deferred purchase price, and all fees, are settled in arrears monthly, and therefore no payments were made to the Purchasers and no cash inflows were received related to the deferred purchase price during the six months ended June 30, 2011 as the first monthly settlement date under the Program had not yet occurred. Servicing fees under the program were not significant.
Bunge’s risk of loss following the sale of the accounts receivable is limited to the deferred purchase price, which was $119 million at June 30, 2011. The deferred purchase price will be repaid in cash as receivables are collected, generally within 30 days. Delinquencies and credit losses on accounts receivable sold under the program in 2011 were insignificant. Because the cash received up front and the deferred purchase price relate to the sale or ultimate collection of the underlying receivables, and are not subject to significant risks, other than credit risk, given their short term nature, we reflect all cash flows under the securitization program as operating cash flows in our condensed consolidated statement of cash flows for the six months ended June 30, 2011. Changes in the fair value of the deferred purchase price were not significant and are reported as investing activities in Bunge’s condensed consolidated statement of cash flows for the six months ended June 30, 2011. |