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What are the concerns of law firms participating in ABS business of urban investment supply chain? The credit analysis of urban investment supply chain asset securitization products mainly focuses on the analysis of participating institutions and basic assets (including legal and financial aspects). Participating institutions include core enterprises, third-party credit enhancement institutions (if any), important debtors (accounts receivable account for more than 15% or debtors and their related parties account for more than 20%), original stakeholders, etc. Since the credit rating of the asset securitization products of the urban investment supply chain largely depends on the credit status of the core enterprise (i.e. the urban investment company), it is necessary to focus on the analysis of the credit level of the core enterprise (such as profitability, solvency, asset structure, etc.).

The credit analysis of core enterprises can be carried out in combination with the characteristics of the urban investment company, usually considering the regional risk status, its own business status, financial status, external support and other factors of the urban investment company. Regional risk status can generally be investigated in terms of regional GDP scale, GDP growth rate, per capita GDP, public fiscal revenue, etc. Business conditions can be considered from the aspects of business competitiveness, sustainability and stability, and diverse performance. In terms of finance, it mainly analyzes the asset scale, debt level and cash flow recovery of the urban investment company. In addition, various forms of external support that local governments and relevant units may provide to CIC should also be considered. In the case of a third-party credit enhancement institution, the asset securitization product level of the urban investment supply chain depends on the subject level of the credit enhancement institution, so it is also necessary to focus on the judgment of the qualification and credit enhancement effect of the credit enhancement institution. In addition, the asset securitization products of urban investment supply chain also need to analyze the repayment ability of important debtors and the due diligence performance ability of original equity holders.

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❐ in terms of basic assets, focus on whether the basic assets are true and whether the transaction consideration is fair; Whether the ownership division is clear and whether it involves litigation; Whether there are rights restrictions; Whether the accounts receivable can be specified, and whether the amount and payment time are clear; Whether the transaction contracts involved in the underlying assets are true, legal and effective. The investigation and analysis of basic assets are generally carried out around the pool entry standard of basic assets. For pool entry standards, please refer to the guidelines for confirmation of listing conditions of accounts receivable asset-backed securities issued by Shanghai and Shenzhen Stock Exchange.

According to the guide, when issuing asset-backed securities with enterprise accounts receivable as the underlying assets, the underlying assets need to meet: (1) the definition of underlying assets should be clear, and the specific content of subsidiary security interests (if any) should be clear. (2) The original equity holder shall legally own the underlying assets, and the accounts receivable involved shall be generated based on real and legal trading activities (including the sale of goods, the provision of labor services, etc.), the trading consideration is fair, and does not involve the guidance on the negative list of underlying assets of Asset Securitization business. If the accounts receivable are transferred from a third party, the original equity holder shall have paid the transfer consideration, and the transfer consideration shall be fair. (3) The transaction contract involving the underlying assets shall be legal and effective, the creditor has performed its obligations under the contract, the payment conditions agreed in the contract have been met, there is no prepayment, and there is no defense and offset for the debtor to perform its payment obligations. (4) The accounts receivable involved in the underlying assets should be specific, and the amount of accounts receivable and payment time should be clear. (5) The ownership of the underlying assets shall be clear and definite, and shall not be attached with mortgage, pledge and other security burdens or other rights restrictions. Where there are mortgage, pledge and other security burdens or other rights restrictions, they shall be able to be lifted when the original equity holders transfer the basic assets to the special plan through the relevant arrangements of the special plan. (6) The underlying assets shall be transferable. The transfer of the underlying assets shall be legal and effective, and the transfer consideration shall be fair. If there are subsidiary security interests, they shall be transferred together. (7) The debtor and the obligor of the subsidiary security interest (if any) shall be notified of the transfer of accounts receivable, and the transfer of accounts receivable shall be registered with the relevant registration authority. In addition, according to the guidelines for the confirmation of listing conditions of accounts receivable asset-backed securities, if the underlying assets involve the payables of the supply chain of core enterprises, the asset pool includes at least 10 creditors who are not related to each other and the debtor's credit status is good.

In practice, in addition to the above eligibility criteria, common eligibility terms also include: (1) debtors under underlying assets do not involve local governments or local government financing platform companies; (2) The maturity date of any accounts receivable corresponding to the underlying assets is earlier than the expected maturity date of the special plan, but later than the establishment date of the special plan; (3) The underlying assets are not involved in any pending litigation, arbitration, execution or bankruptcy proceedings, and have not been subject to any judicial preservation or enforcement measures such as seizure, seizure, freezing, etc; (4) The proportion of the outstanding accounts receivable balance of related transaction accounts receivable to the balance of the asset pool cannot exceed a certain proportion, etc.

In terms of cash flow analysis, the future cash inflow of urban investment supply chain ABS is the total scale of outstanding accounts receivable in the underlying asset pool. Under pressure, it is usually considered to pressurize the expected issuance interest rate, and the net cash flow recovered from the underlying assets needs to cover the principal and expected income of priority asset-backed securities. In terms of hierarchical design, ABS in the urban investment supply chain mostly adopts the priority secondary structure, and the secondary proportion is low.

For the verification of accounts receivable as basic assets, Shanghai Stock Exchange, Shenzhen Stock Exchange and the inter agency private placement product quotation and service system issued the guidelines for the confirmation of listing conditions of enterprise accounts receivable asset-backed securities (hereinafter referred to as the "listing guidelines") respectively, The China Fund Industry Association also issued the working rules for due diligence of enterprise accounts receivable asset securitization business (hereinafter referred to as the "due diligence rules"). The listing guide and the due diligence rules mainly stipulate the accounts receivable of the underlying assets from the following aspects.

According to the definitions of the listing guide and the due diligence guide, accounts receivable refer to the payment claim rights obtained by an enterprise after performing its obligations to sell goods, provide labor services and other business activities under the contract, but do not include the payment claim rights arising from holding bills or other securities. Why is it difficult to confirm the rights of accounts receivable? The difficulties mainly focus on the complexity and information asymmetry of the basic transaction link, and rely on the information records of creditors and debtors in the process of performing the basic transaction. If there are wrong records, fictitious records or concealed records, it will lead to significant risks in the authenticity and legitimacy of accounts receivable.

According to the listing guide, the transaction contract involving the underlying assets should be legal and effective, the creditor has performed its obligations under the contract, the payment conditions agreed in the contract have been met, there is no prepayment, and there is no defense and offset for the debtor to perform its payment obligations. Therefore, the confirmation of the right of accounts receivable is a systematic work, which needs to clarify the specific right of payment claim enjoyed by the creditor against the debtor in combination with the existing information, and exclude the debtor's right to defend the claim. The legal due diligence on the confirmation of the rights of accounts receivable is also carried out mainly from two perspectives: (1) check the authenticity of the creditor's payment claim under the basic contract; (2) Check the integrity of the debtor's payment obligations under the basic contract.