In September 2005, the company consolidated its securitization SPE, reporting its debt on its own balance sheet, and reporting the cash proceeds in the financing cash-flow portion of the cash-flow statement. Yet under Arvinmeritor's earlier securitization program, in which two SPEs were used, the company did not report the debt, and the cash proceeds appeared in the operating cash-flow section.
"Arvinmeritor points to the arbitrary, rule-based nature of securitization," says Mulford. "You jump through one hoop and it shows up as debt and financing cash flow. You jump through two hoops, and it's off-balance-sheet and operating cash flow."
Reader CommentsDisplaying 3 of 7
Tim Reason
Jul 6, 2006 8:57 PM ET
If the Brush Fits
Kevin, you're quite right that this story refers primarily to trade receivables — a portion of the overall … more
Joel Clark
Jul 6, 2006 6:07 PM ET
Some very good observations
I work with receivable finance and related transactions. Although I have seen these financial tools save businesses and … more
Kevin O'Hagen
Jul 6, 2006 11:46 AM ET
Too broad a brush
The term "securitizations", as it is used in this article, seems to refer to only one type of asset-backed transaction, … more
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