Evolution Credit Partners, an alternative credit manager, has launched a trade credit protection (TCP) programme to protect sellers and their related account receivables against non-payment or bankruptcy of buyers.
Evolution, which launched in April 2018 after spinning out from Harvard Management Company, has approximately US$2.5bn in assets under management as of December 2021 and invests across two primary credit strategies: leveraged finance and trade finance, with its trade finance credit solutions covering both accounts receivable and supply chain finance.
The TCP product focuses on lower credit-quality buyers that are not covered or find limited capacity within the traditional trade credit insurance markets, which tend to target high credit quality or investment-grade buyers.
“Evolution has launched TCP because it has identified a clear gap in the trade credit risk market,” Kerstin Braun, managing director of trade finance at Evolution, tells GTR.
Like credit insurance, the TCP product provides credit protection for sellers from buyers. If a buyer does not make payment to the seller for pre-defined reasons, Evolution commits to purchase the outstanding account receivables from the seller at approximately 90% of the outstanding account receivables amount, thereby providing the seller with cash.
However, Evolution says its TCP product has several advantages that traditional credit insurance does not offer to buyers, one of which being its duration. According to Evolution, the TCP product can be modified to cover a period as short as three months. “It is highly unusual for traditional trade insurance companies to commit to such a short term,” says Braun.
She adds that the TCP programme does not require regular reporting to Evolution, whereas traditional credit insurance typically requires ongoing notifications to the insurance company.
Evolution says it is prepared to transact across companies in all sectors, of all sizes, and in all geographies, and does not have a fixed capacity for companies or counterparties – unlike trade credit insurance companies. “Instead, Evolution’s flexibility and bespoke TCP product creates a unique solution for buyers and sellers around the world,” says Braun.