Abstract:
A business method is chartered by a defined group of competing independent buyer/obligor companies ( 102 ), to acquire or finance receivables ( 106 ) of the buyer/obligor companies ( 102 ). In cooperative consultation between the buyer/obligor companies ( 102 ) and the business entity ( 100 ), terms of receivables ( 106 ) of the buyer/obligor companies ( 102 ) are defined, to improve efficiency of financing the receivables. The buyer/obligor companies ( 102 ) agree to preferentially disclose credit information on themselves to the business entity ( 100 ). Obligee companies ( 104 ) agree to accept book entries on a computer system operated by the business entity ( 100 ) as the controlling form of financial obligations arising out of sale of goods or services ( 108 ) sold by to buyer/obligor companies. The business entity accepts custody of a majority of a class of receivables of buyer/obligor companies to creditor companies. The receivables ( 106 ) are recorded on a computer system that also functions as a business-to-business platform for the sales of the goods. The business entity extends offers to holders of the receivables for purchase of the receivables. The business entity sells to the capital markets securities ( 114 ) backed by cash flows from receivables purchased pursuant to the offers. A market for trading of the receivables is provided through computer access to inventory information and order placement facilities.

Description:
[0001]    This application claims priority from U.S. provisional application serial No. 60/191,901, filed Mar. 24, 2000, which is incorporated herein by reference. 
     
    
     
       BACKGROUND  
         [0002]    The invention relates to arrangements for financial or business practices.  
           [0003]    The rise of the internet has accelerated the emergence of business-to-business (or “B2B”) markets, for instance, those in which business transactions may be negotiated and agreed electronically. Computers and their operations provide a significant part of the infrastructure of a B2B marketplace, and facilitate business transactions in those markets with efficiencies previously unforeseen.  
           [0004]    In recent years, companies have obtained financing by engaging in “securitization” transactions in which the company (or, more typically, a bankruptcy-remote special purpose vehicle) issues debt instruments backed by an asset or pool of assets in which the principal and interest is paid from the cash flow generated by the assets. In most securitizations, the transaction is structured to exclude the credit risk of the sponsor of the transaction so that the credit worthiness of the debt instruments issued in the securitization depends primarily on the credit risk inherent in the underlying financial assets. Once the extent of such credit risk has been quantified, typically by a rating agency, a form of credit and liquidity support can be supplied to cover the risk, permitting the securities issued in the transaction to be highly rated, even in cases where the sponsor of the transaction is not rated or is a poor credit risk. The levels of credit support and liquidity required in a securitization may be a function of the requirements set by the rating agencies based on their analysis of the quality of the underlying assets and the structure of the securities in light of the probable rates of default and recovery on the underlying assets. Because traditional general obligation debt is backed by the credit of the entire operating company, and the operating company is subject to a wide range of risks in the market place, an operating company seeking to issue highly-rated general obligations may be required to maintain relatively higher levels of capital and liquidity than in a securitization transaction in which the risk can be segregated to the performance of particular assets.  
           [0005]    Securitization transactions include “cash flow” or “market value” transactions. In a “cash flow” securitization, the securities issued in the transaction are paid from roughly matching payments expected to be received on the underlying assets. In “market value” securitizations, the ability to repay the securities depends on the sufficiency of, and ability to realize upon, the value of the underlying assets. For example, in a typical “market value” transaction, the initial offering raises enough cash to pay coupon payments, and the final terminating payment is financed by selling the assets to third parties.  
         SUMMARY  
         [0006]    In general, in a first aspect, the invention features an arrangement in which a business entity is chartered to acquire or finance debt of members of a defined group of competing independent businesses. In cooperative consultation between the independent businesses and the business entity, terms of debt instruments of the independent businesses to creditors are defined, the definition of terms being directed to improving efficiency of financing the debt.  
           [0007]    In general, in a second aspect, the invention features an arrangement in which offers are extended from a business entity to holders of financial obligations of obligor companies for purchase of the obligations. The business entity is under cooperative operation of several independent companies. Securities backed by cash flows from obligations purchased pursuant to the offers are sold to the capital markets.  
           [0008]    In general, in a third aspect, the invention features an arrangement in which offers are extended to purchase financial obligations of members of a defined group of competing obligor businesses. The obligations are receivables owed to obligees by the obligor businesses for purchase from the obligees of inputs to the obligor businesses. Securities backed by cash flows from obligations purchased pursuant to the offers are sold to the capital markets.  
           [0009]    In general, in a fourth aspect, the invention features an arrangement in which goods and/or services are sold from a plurality of seller companies to a plurality of buyer companies. The buyer companies owe receivables to the seller companies for the goods. The receivables are recorded on a computer system that also functions as a business-to-business platform for the sales of the goods.  
           [0010]    In general, in a fifth aspect, the invention features an arrangement in which a business entity extends offers to holders of financial obligations of obligor companies for purchase of the obligations. The business entity is under cooperative operation of several independent companies. The obligor companies agree to preferentially disclose credit information on themselves to the entity.  
           [0011]    In general, in a sixth aspect, the invention features an arrangement in which obligor companies owe financial obligations to obligee companies for goods or services sold by obligee companies to obligor companies. The obligee companies agree to accept, as the controlling statement of the obligations, a book entry on a computer system operated by a business entity. The entity is chartered by at least some of said obligee or obligor companies as custodian for the obligations.  
           [0012]    In general, in a seventh aspect, the invention features an arrangement in which a business entity accepts custody of a majority of a class of obligations of obligor companies to creditor companies. The business entity also serves as the recorder of the current ownership of the obligations. The business entity operates a market for trading of the obligations by providing computer access to inventory information and order placement facilities.  
           [0013]    Embodiments of the invention may include one or more of the following features. The business entity may finance the receivables by offering aggregated baskets of debt of two or more of the independent businesses on the capital markets. The defined terms may include waiver by the independent businesses of defenses to payment or collection of the debt. The defined terms may include the addition of representations and warranties to the debt. The defined terms may include standardizing terms of debt instruments of all members of the group of independent businesses. A plurality of purchased debts may be aggregated for offer of a securitization to a secondary market. At least two baskets of the obligations may be simultaneously aggregated for securitization to the capital markets as two separate securities. In cooperative consultation between the obligor companies, the business entity, and a commercial rating agency, terms of debt instruments of the obligor companies may be defined, directed to improving efficiency of financing the debt.  
           [0014]    These attributes, advantages and features are of representative embodiments only. Additional features and advantages of the invention will become apparent in the following description, from the drawings, and from the claims. 
       
    
    
     DESCRIPTION OF TIHE DRAWING  
       [0015]    [0015]FIG. 1 is a block diagram of parties and cash flows in a transaction. 
     
    
     DESCRIPTION  
     I. Overview  
       [0016]    Referring to FIG. 1, companies  102  are buyers, and companies  104  are sellers of goods and/or services  108 , possibly in an internet-intermediated B2B marketplace. The purchases by buyer companies  102  create receivables, notes or other rights to payment  106 , that are owned by the seller companies  104 . In some cases, a seller  104  may need immediate cash, rather than the deferred payment due on receivable or note  106 , and thus may need to finance notes  106 . A specialized finance company  100  may provide access to the capital markets through securitization, or may obtain more traditional lending (for on-lending). Specialized finance company  100  may be able to provide financing on more efficient terms than individual participants could realize elsewhere because finance company  100  may be able to realize benefits from its connection to the infrastructure of the marketplace and various arrangements and agreements it has with market participants  102 ,  104 ,  110 . Participants  100 ,  102 ,  104  may work together to improve the efficiency of the market in receivables  106 , for instance by agreeing to a common electronic form for receivables  106 , or by providing preferential access to information, as discussed in sections III.G and III.H. Participants  100 ,  102 ,  104  may further increase these efficiencies by agreeing to tailor their rights and responsibilities and the terms of the financial assets  106  in a variety of ways, as described in section III.D. Finance company  100  may determine with the rating agencies the various parameters and terms under which finance company may aggregate and securitize receivables  106  generated in the B2B marketplace, as will be discussed in detail in section III.B.  
         [0017]    Buyers  102  and sellers  104  may agree that the controlling records of receivables  106  are electronic records stored in a computer run as part of the infrastructure of the market in the underlying goods or services  108 . Using a computer communications network, the seller/lender companies  104  holding those electronic notes may offer their notes  106  for sale to finance company  100 . Finance company  100  may purchase notes  106 , and then either sell notes  106  outright as whole loans to the capital markets  110 , aggregate them into baskets  112  for sale to capital markets  110 , or securitize baskets  112  of the notes to the capital markets  110 . Finance company  100  may aggregate the notes to balance the credit and liquidity of the underlying notes  106  to raise the price it realizes for the securities  114  it sells to capital markets  110 . Securities  114  issued to capital markets  110  may be backed by and will be paid from the proceeds of the notes  106 , that is, from payments made by buyer/obligor companies  102 . In the case where baskets  112  are securitized  118  to the markets, payments received from buyer/obligor companies  102  may be paid to capital markets investors  110  as principal and interest payments on the securities of the finance company  100 .  
         [0018]    Finance company  100  may determine, possibly in consultation with the rating agencies, the various parameters and terms under which finance company  100  may aggregate and securitize receivables  106  generated in the B2B marketplace. These parameters and terms may be a function of the contractual terms of the receivables  106 , the credit risk of the buyer/obligor companies  102 , the level of asset or obligor concentration, the size of the pools  112  of receivables available for financing, and so on. With this information and by monitoring pricing in the relevant portions of the capital markets  110 , finance company  100  may provide ongoing pricing or financing terms to sellers/obligees  104  of receivables in the B2B market. In turn, finance company  100  may securitize the receivables (for instance in an asset-backed commercial paper program maintained by finance company  100 ) or obtain financing from a more traditional lender who would receive the benefits of aggregation, structuring and so on through the finance company and the various arrangements agreed to by the market participants.  
         [0019]    The transaction may be structured to isolate investors  110  from the credit risk of the buyer/obligor company  102 , so that the creditworthiness of securities  114  may be primarily dependent on the creditworthiness of the notes  106  backing the transaction and any related credit support arrangement provided to the transaction in order to absorb some or all of the credit risk inherent in notes  106 . In contrast, an operating buyer/obligor company  102  may be subject to a wide range of changing risks in the marketplace. By isolating these uncertainties, operating company  102  may typically obtain a higher credit rating for a securitization than for a general obligation note issued with the same levels of capital and liquidity.  
         [0020]    Communications facilities and other computer infrastructure may be provided to facilitate cooperation between finance company  100 , buyer/obligor companies  102 , rating agencies, sellers  104  of the notes, and/or the investors  110  in securities, to more efficiently negotiate the securities. By using finance company  100  to finance the notes  106  generated by a business-to-business exchange consortium, the participants in such a consortium may gain access to a more efficient source of financing than if they financed such notes through traditional channels.  
         [0021]    By managing the flow of notes  106  into finance company  100  from sellers/obligees  104  and the kinds of securities  114  issued to capital markets  110 , finance company  100  may provide financing for participants  102 ,  104  at a reduced cost of funds. Aggregating  112  of notes from multiple buyer/obligor companies  102  may reduce the risk premium of securities  114  relative to the interest rate on underlying notes  106 .  
         [0022]    The use of securitization to divide the cash flows from a pool of assets to create securities with different terms and maturities than the terms and maturities of the underlying assets may further reduce the cost of funds to participants  102 ,  104 . For example, a pool of 30-year loans  106  can be used to back 3-year, 5-year, 7-year, 12-year and 30-year securities  114 . The shorter term securities can pay less interest to capital market investors  110  than the underlying 30-year loans, permitting the excess interest to be sold to other investors for a profit. Conversely, a pool of revolving short-term assets, like credit card receivables, can be used to back securities  114  with a longer term, permitting more efficient financing for such revolving financial assets  106 .  
         [0023]    In the conventional market for trade debt, a seller/obligee  104  might take a portfolio of obligations to a bank, for example a small bank in the locale. Seller/obligee  104  may pledge the obligations as security, and borrow from the bank at some rate based more on that bank&#39;s cost of funds or the bank&#39;s deposits, perhaps 11%, than on the capital market cost of funds, which might be 7% or 8%. Because the bank may have little access to the capital markets, it may pay a very inefficient rate. Neither seller/obligee  104  nor the bank may be big enough, and seller/obligee  104  may not have the creditworthiness, to access the capital markets. In contrast, if seller/obligee  104  has the ability to borrow from finance company  100 , which borrows directly from the capital markets  110 , seller/obligee  104  may get close to capital market rates. The capital markets are the wholesale source of funds, the cheapest rate source of funds (except for occasional lenders that lend at a loss). The cost of funds between finance company  100  and sellers/obligees  104  may be significantly lower than the rates that each of those sellers/obligees  104  would have realized borrowing from their respective lenders. Some of the arbitrage, the savings realized by finance company  100 , may be passed through to sellers/obligees  104 . Some of the savings will be passed through to buyer/obligor companies  102 . Some of the savings may be retained by finance company  100  to pay fees and expenses, and operating profit.  
         [0024]    The availability of a finance company  100  need not preclude the use of traditional financing sources but finance company  100  may be more efficient than traditional financing sources, particularly where finance company  100  is organized and operated for the market and its participants  102 ,  104  generally rather than for particular market participants.  
         [0025]    An electronic finance company  100  that is connected through a B2B marketplace&#39;s infrastructure to the buyers, sellers and other participants in such marketplace may provide financing for the market participants at to-date unseen efficiencies, as well as acting as a connecting channel between the marketplace and the capital markets. A specialized finance company  100  may provide access to securitization as a financing vehicle, further enhancing the access to credit and the capital markets by B2B market participants.  
       II. Parties  
       [0026]    Buyer/obligor companies  102  may be large companies with relatively comparable credit, within one or two rating notches of each other. For example, buyer/obligor companies  102  might be Ford, GM, Chrysler, Toyota, and Honda, and finance company  100  may be organized to manage receivables arising pursuant to their purchases of auto parts. In other examples, buyer/obligor companies  102  could be buyers of hard goods, retail goods, clothing, farm crops, or services. In other examples, buyer/obligor companies  102  could be companies borrowing to finance capital assets.  
         [0027]    Sellers/obligees  104  may be auto parts manufacturers, manufacturers of goods, suppliers of raw materials or services to buyer/obligor companies  104 , etc.  
         [0028]    Typically, though not necessarily, buyer/obligor companies  102  may be participants in a relatively concentrated industry. As will be noted below, the operations of finance company  100  may be improved if there are a relatively small number of buyer/obligor companies  102 , so that finance company  100  can develop good credit information about the obligor companies  102 .  
         [0029]    Finance company  100  may have a distinct legal existence, for example, incorporated as a special purpose entity (SPE) that is bankruptcy remote from buyer/obligor companies  102 . Finance company  100  may act as the legal obligor on securities  114 . Finance company  100  may be a business entity (for example, a corporation, limited liability company, or trust) owned cooperatively by either buyer/obligor companies  102 , by sellers/obligees  104 , or jointly by buyer/obligor companies  102  and sellers/obligees  104 . In other cases, finance company  100  may not have a distinct legal existence, but may be operated through the cooperative efforts of a consortium of members  102  and/or  104 .  
         [0030]    Finance company  100  may operate though an internet web site that functions somewhat in the manner of a securities exchange, analogous to a NASDAQ electronic “trading floor,” trading the notes and/or receivables  106  of buyer/obligor companies  102 . The finance company&#39;s internet site may be available to buyer/obligor companies  102 , to sellers/obligees  104 , and to investors  110 . Finance company  100  may provide different amounts of information access to different participants  102 ,  104 ,  110 . For example, a particular buyer/obligor  102  may have access to all information about notes  106  of that buyer/obligor, but less information about receivables of other buyer/obligor companies  102 . Information about a given note  106  may be kept relatively closely held while note  106  is held on the books of finance company  100  exclusively for the benefit of a given seller/obligee  104 , but more information may be made publicly available once a seller/obligee  104  chooses to sell note  106 .  
         [0031]    Finance company  100  may serve as a conduit vehicle to access the capital markets  110  to issue highly-rated securities  114  that might be backed by financial assets  106  from a diverse group of different buyer/obligors  102  of financial assets. Where a traditional market is typically highly decentralized and fragmented, with different sellers dealing one on one with their buyers, finance company  100  may provide a “standardized” product. Because the terms and sales channel may be standardized and fairly routine, the financing of notes  106  may be more efficient, with lower costs for sellers. A rating agency may be able to view the market made by finance company  100  in a standardized manner, so that the rating agency can develop better information on securities  114  offered through finance company  100 . This improved information may reduce the risk to investors  110 , and thereby reduce the risk premium demanded by investors  110 , with a consequent improvement in cost of funds to sellers  102 ,  104 .  
         [0032]    Finance company  100  may finance itself by retaining a holdback, or “haircut,” out of the proceeds on sale of securities  114 . (A haircut is a discount rate, or up-front fee at the time of the offering. For example, on $10,000 worth of notes, finance company  100  may only pay seller/obligee  104  $9,950. The $50 discount covers interest on the securities that the finance company  100  issues to the market, principal, and program fees and expenses.) This holdback may include program fees, and cover the finance company&#39;s cost of funds, its internal costs and expenses, etc., and may insure finance company  100  against potential charge-off issues, delinquencies, defaults, interest rate and market price fluctuations, and other market risks, and may in some cases generate an operating profit. Some of the holdback may be paid to the buyer/obligor companies  102 , and/or some may be paid to seller/obligee companies  104 .  
         [0033]    The parties in capital markets  110  that purchase the securities  112 ,  116 ,  118  may draw funds from savings deposits, insurance premium payments, and the like.  
       III. Finance Company Activities  
       [0034]    III.A. Flow of Funds  
         [0035]    When buyer/obligor  102  purchases goods or services from seller/obligee  104  (or otherwise borrows from seller/obligee  104 ), buyer/obligor  102  gives a note  106  to seller/obligee  104 , typically due in 30, 60 or 90 days, to the account of seller/obligee  104  at finance company  100 . Where a traditional receivable might have been delivered to seller/obligee  104  as a signed writing, sellers/obligees  104  may agree to accept credit entries on the computer system of finance company  100 , as the authoritative record of receivables between seller/obligees  104  and buyer/obligor companies  102 . This bookkeeping may be straightforward, because of the close relationship between buyer/obligor  102  and finance company  100 . Finance company  100  may acknowledge the credit of the note to seller/obligee  104  through the internet.  
         [0036]    Participation by seller/obligee companies  104  in the finance company  100  may be optional, and seller/obligees  104  may be free to request receivables in the traditional form of a signed writing. Even if the receivable  106  is received through finance company  100 , a seller/obligee  104  may be free to finance receivables  106  through a traditional channel, such as factoring. Alternatively, buyer/obligor companies  102  may specify that finance company  100  is the only or preferred method of payment. Sellers/obligees  104  may find it beneficial to accept payment through finance company  100  because the market made by and alternative financing methods made available through financing company  100  may be more efficient than traditional factoring. This efficiency may translate into a higher price paid to seller/obligee  104 —for instance, where a traditional factor may pay 90% of par value for a given receivable, finance company  100  may be able to pay 95% of par value.  
         [0037]    The bookkeeping for notes  106  may be coupled with other business-to-business (or “B2B”) markets, particularly (but not necessarily or exclusively) in the context of a B2B market organized among a consortium of buyers  102  and sellers  104  for auto parts, retail goods, crops, or other assets. Transactions in these B2B markets may generate a high volume of receivables  106  for which buyer/obligor companies  102  are account parties.  
         [0038]    A seller/obligee  104  may make an inquiry at finance company  100  web site to find records of notes credited to the seller/obligee&#39;s account. Finance company  100  may present seller/obligee  104  with a number of available financing options. Seller/obligee  104 , may wait, with the record remaining on the computer of finance company  100 , until buyer/obligor  102  redeems the note  106  for cash at the due date. Seller/obligee may receive the note  106  in negotiable form to sell or borrow against, outside the auspices of finance company  100 .  
         [0039]    Alternatively, finance company  100  may offer to sell note  106  to the capital markets on behalf of seller/obligee  104 , or may offer to buy the note  106  outright for its own account, or to buy the notes  106  to replace notes that have come due and been redeemed by buyer/obligor companies  102  within a revolving pool  112  of securities previously issued by finance company  100 . Finance company  100  may offer several different sets of terms, varying based on upcoming offerings that finance company  100  plans to offer to the market, or its needs to replace redeemed securities. For example, finance company  100  may offer 5-year notes, at a particular spread relative to the 30-year treasury rate, 30-, 60-, and 90-day notes, etc. In some cases, finance company  100  may offer a periodic payment plan to seller/obligee  104 . Finance company  100  may offer several different options to seller/obligee  104  at different prices, depending on the basket  112  into which the note is to be grouped. The capital structure and the characterization of the securities  114  to be issued depend on rating agency criteria applicable to the securities being issued, the characteristics of the portfolio, and other factors. Finance company  100  may take these features into account, and attempt to increase diversification of the companies  102  represented in the baskets  112  while preserving homogeneity of the assets as discussed in sections III.G and III.C. Assuming that seller/obligee  104  chooses to finance note  106  though finance company  100 , the finance company&#39;s computer system may offer a cash price for the note  106 , or may offer other prices for future sale. This price may be more favorable to seller/obligee  104  than the price in the conventional market, because finance company  100  may have current, thorough information on the individual buyer/obligor companies  102 , and may be able to readily evaluate the credit quality of the particular buyer/obligor  102 , and the quality of note  106 .  
         [0040]    Finance company  100  accepts the note easily, and may be able to forego a credit check on obligor/buyer/obligor  102 , because of the close and continuing knowledge by finance company  100  of the credit status of buyer/obligor  102  (see section IV). This credit information may be especially reliable in cases where buyer/obligor members  102  are the sponsors of finance company  100 . Finance company  100  may not have to obtain a credit check of seller/obligee  104 , because the note is backed by buyer/obligor  102 , and finance company  100  already has possession of the asset, and may have a preferential relationship with buyer/obligor  102   104  that may facilitate collecting on the note  106 .  
         [0041]    III.B. Aggregating Notes for Securitization  
         [0042]    After purchasing notes  106  from sellers/obligees  104 , finance company  100  may package note  106  with others and sell it to the capital markets  110 .  
         [0043]    The efficiency of securitization  118  may be improved by increasing the homogeneity of the assets  106 , for example, by standardizing the terms of notes  106 . For example, finance company  100  may establish standards, communicated to buyer/obligor companies  102 , for those notes that finance company  100  will accept for financing. Notes  106  that observe certain standard terms may be more easily packaged and sold to the capital markets. The efficiency of the securitization may also be improved by diversifying concentration of underlying obligors  102  and industry categories. The greater the efficiency of a securitization the higher the price that can be charged in the market, and the lower the spread between the price obtained in the market and the price paid to participants  102 ,  104 , and the lower the cost of funds for participants  102 ,  104 .  
         [0044]    A finance company or vehicle  100  that is organized to provide a market for notes  106  and is integrated with the B2B platform for goods or services may be capable of efficiencies of specialization. Buyer/obligor companies  102  may be able to shape the financing program provided by finance company  100  and/or tailor their own obligations  106  to meet rating agency criteria, which in turn may improve the price received in a sale or securitization of the notes  106 . Finance company  100  and participants  102 ,  104  may adjust the capital structure of the notes in a particular basket  112 , the characteristics of the portfolio, and the characterization of the securities  114  to be issued in order to obtain favorable ratings from rating agencies for the issued securities.  
         [0045]    III.C. Maintaining Portfolio Balance  
         [0046]    Finance company  100  may aggregate notes  106  from several buyer/obligor companies to mitigate geographic and obligor concentration risk. Alternatively, finance company  100  may aggregate notes  106  into tranches of varying risk. Finance company  100  may use the price it pays to seller/obligees  104  to manage the mix of notes in baskets  112 .  
         [0047]    Finance company  100  might offer multiple options to seller/obligee  104 , based on the following factors. Because there may be multiple buyer/obligor companies  102 , and hundreds of different sellers/obligees  104  selling goods and/or services  108  to these members, there may be different mixes of these notes  106  offered to finance company  100  on any given day. Finance company  100  may attempt to put together a beneficial mix of assets and trancheing based on the rating agency criteria as that mix meets or misses an optimal mix. For example, a rating agency may rate a given security offered by finance company  100  based on an assumption that 60% of it is backed by buyer/obligor A obligations, and 20% by obligations of buyer/obligor  102  B, and 20% by obligations of buyer/obligor C.  
         [0048]    In one example, finance company  100  may set a target mix of A, B, and C at 60%, 20%, and 20%, to mitigate of concentration risk-the obligation of A is diversified against obligations of B and C. Diversification reduces the default rate risk. By reducing risk, finance company  100  may be able to reduce the ‘haircut’ on the deals, taking out some of the risk premium.  
         [0049]    Efficiency may also be improved because the rating agency has specialized information about buyer/obligor companies  102 . If finance company  100  needs additional information about the obligations  106 , finance company  100  may have preferential access to buyer/obligor companies  102  as discussed in section IV, infra.  
         [0050]    In addition to the terms and tenor of the security being sold, the baskets  112  may vary according to the financial assets backing those securities, based on the selling activity of the other sellers/obligees  104  selling their financial assets into finance company  100 . For example, returning to the example of a basket  112  with a target of 60% A, 20% B and 20% C, assume that the current basket  112  is half full, currently holding 60% receivables of buyer/obligor  102  A, 30% B, and only 10% C. This basket  112  is a little out of balance to the desired mix, with too many B assets and too few C assets. Finance company  100  may attempt to correct this imbalance by adjusting the haircut, and the price paid for notes  106 . When the basket  112  is already out of balance and the new asset would add to the imbalance, then the haircut will be a little greater, and the offered price a little lower. In this example, finance company  100  may offer seller/obligees  104  a slightly lower price for receivables of buyer/seller B. Finance company  100  may offer a higher price, a lower haircut, on assets of buyer/obligor  102  C (that is below the target). It is acceptable for the basket  112  to be off the desired balance, but the rating agency may require that the haircut be a little larger, and the price offered to seller/obligee  104  a little lower, to reflect the increased concentration risk.  
         [0051]    Finance company  100  may currently be filling several baskets  112 , varying by priority tranche, or different maturities of the security, etc. By filling several baskets  112  simultaneously, finance company  100  may raise the chance that the offered receivable makes a positive contribution to balance and diversification of at least one of the baskets  112 . This may raise the price that finance company  100  can offer to seller/obligee  104 .  
         [0052]    Usually, finance company  100  will offer seller/obligee  104  a price that seller/obligee  104  can accept, and seller/obligee  104  will accept the offer, and finance company  100  will electronically transfer the agreed price on overnight settlement, or whatever terms the parties agree.  
         [0053]    In some cases, all of the medium term (e.g. five year) baskets  112  may be over-weighted with the receivable offered by buyer/obligor  102 , and the price offered by finance company  100  will be relatively low. In this case, seller/obligee  104  will likely simply decline to sell. Finance company  100  may offer an alternative, e.g., 30 day commercial paper; seller/obligee  104  may exchange the receivable  106  for 30 day commercial paper, and hope that there will be a more favorable basket  112  available 30 days later when the receivable comes back.  
         [0054]    Finance company  100  may offer a “queue holder” option, under which seller/obligee  104  acquires first-in-time priority to join the next medium term basket  112 .  
         [0055]    Finance company  100  may require buyer/obligor companies  100  to use credit bolstering techniques, as discussed in III.D.  
         [0056]    Seller/obligee  104  may be exposed to a new kind of demand risk, that certain receivables will be more valuable to finance company  100  at certain times, and less valuable at other times, depending on what receivables are already in the existing baskets  112 . However, this effect is only a mirror of the more conventional demand risk—paper that is in oversupply has a lower price. The effect may be significantly smaller than the benefit to seller/obligee  104 , and a seller  104  retains the option to factor the receivable in the conventional manner, if a factor will give a better spread than finance company  100 . First sellers into new baskets  112 , and sellers of securities that are under-weighted in the current basket  112 , will benefit. If and when a basket  112  starts tipping up over the optimal, sellers  104  of over-weighted securities may get less favorable pricing. Finance company  100  may attempt to reduce these fluctuations, by allowing sellers to wait until a new basket  112  is started, or increasing or reducing the size of the basket  112  to try to create a smaller basket  112  whose proportions are more easily balanced. Finance company  100  may adjust target weightings of baskets  112 .  
         [0057]    III.D. Improving the Mix of Receivables and Notes Offered for Financing  
         [0058]    Participants  102 ,  104 ,  110  may cooperate to define the terms of receivables  106  to improve the efficiency of financing them. For example, efficiency may be improved by reducing features that may impair the timing or amount of payments to be made on a securitized asset  106 . As particular examples, buyer/obligor companies  102  may waive certain legal defenses to payment or collection or may waive certain debtor right, and/or may assume an obligation to pay interest on unpaid amounts by certain dates Buyer/obligor companies  102  may make certain representations and warranties. Buyer/obligor  102  may tailor the timing of events of default, and/or may allow the assets to be held by a collateral agent. A seller/obligee  104  who seeks to finance receivables within the marketplace may be deemed to have made certain representations and warranties regarding the seller, the receivables and transfers of interests therein. Participants  100 ,  102 ,  104  may agree to use of certain generic terms.  
         [0059]    There may be circumstances such as credit issues, liquidity issues and credit ratings that affect the mixing of notes. For example, if one buyer/obligor  102  is BBB rated and the rest of buyer/obligor companies  102  are A rated, the BBB buyer/obligor  102  could reduce the term of its notes  106  in order to help bolster the credit-worthiness of its notes and to get close-to-equivalent treatment. This may be triggered by notice from the rating agency or from finance company  100 , when the agency or finance company  100  notices the weakened credit and threatens to increase the haircut on buyer/obligor company&#39;s notes. Other peculiarities that effect the rating of the note  106  can be bolstered, in one of a variety of ways, in order to achieve a similar rating, and bring the note into line with the other notes in the basket  112 .  
         [0060]    A specific buyer/obligor  102  may have a specific credit problem, and become a weaker credit. By reducing the structure&#39;s exposure to the individual weakened buyer/obligor  102 , the membership as a whole benefits from the improved stability of the consortium&#39;s credit. Buyer/obligor companies  102  may waive certain defenses on their notes, accelerate the payment terms of their notes  106 , add additional covenants, remove other ambiguities, make specific care-outs or additions to a package, or otherwise mitigate risks perceived by the rating agency, in order to bolster the credit quality of the securities that are sold.  
         [0061]    Finance company  100  may have a cost of funds lower than the cost of funds of buyer/obligor companies  102  themselves. Each individual buyer/obligor  102  may be rated A or BBB. The aggregation and credit enhancing performed by finance company  100  may generate AAA rates.  
         [0062]    III.E. Pricing Notes  
         [0063]    Finance company  100  may determine the price that it wishes to pay for notes  106  by any conventional method; additional methods may be derived for particular use by a finance company  100  serving a consortium. For example, note  106  may be priced by the “dead reckoning” of a human being. Computer software may price the note, using a valuation formula that discount the note by an interest rate reflecting the credit risk of buyer/obligor  102 , and a risk premium reflecting uncertainties and volatility in the market, e.g.,  
         price=face×(1− r   1   −r   2 ) t ×(1− r   3 )− r   4    
         [0064]    where  
         [0065]    price is the price paid by finance company  100  to seller/obligee  104   
         [0066]    face is the face amount of the note  106   
         [0067]    r 1  is the risk-adjusted discount rate that the market  110  assigns to like-seniority obligations of buyer/obligor  102   
         [0068]    r 2  is a further risk-adjustment discount rate that finance company  100  may apply, reflecting risks assumed by finance company  100 —e.g., price or rate volatility risks reflecting the time between when the note is purchased from seller/obligee  104  until it is sold to the market  
         [0069]    r 3  and r 4  are discounts out of which finance company  100  takes a profit and administrative fee.  
         [0070]    t is the time to maturity of the security  
         [0071]    Any one, two or three of r 2 , r 3  and r 4  may be zero, or may scale with the face value.  
         [0072]    The price paid by finance company  100  for notes  106  may also reflect rating agencies&#39; evaluation of the buyer/obligor  102 , on the current mixes of the current baskets  112 , etc. Any price that is higher than the price offered by factors or banks will likely be attractive to seller/obligee  104 ; any price that is low enough to leave a profitable spread over the capital markets lending rate, and to cover the finance company&#39;s costs, may be acceptable to finance company  100 .  
         [0073]    The amount of the holdback may be limited so that the transaction will be treated as a true sale, rather than a financing. Under some accounting rules, if party A buys an asset with a face value of $100 from party B for only $50, and promises that the remaining $50 of the note will be given to party B when the note pays off, the transaction may be treated as a loan where A lent $50 to B, and B pledged assets worth $100 on a nonrecourse basis. To avoid the effect of this accounting rule, the holdback must not be too large, so that the transaction will be characterized as a sale rather than a financing. The distribution of the holdback among the seller/obligee  104 , the buyer/obligor  102 , and finance company  100  may be divided to achieve a desired characterization of the transaction, to compensate for risk incurred by each party, to reflect the time value of money, and to provide some profit to finance company  100  and its parent companies.  
         [0074]    III.F. Offerings by Finance Company to the Capital Markets  
         [0075]    Securities  114  offered by finance company  100  to the capital markets  110 , that is, the baskets  112 , may vary with a number of factors. For example, if the underlying goods are farm goods and the notes  106  are the typical notes due to farmers from agriculture companies, and due to seed companies from farmers, the tenor of the notes  106  may tend to be longer than in the automobile parts scenario discussed above, and the trading may be much more seasonally clustered. Thus, finance company  100  may make its offerings  114  daily during peak times, and bi-weekly during slower seasons. The baskets  112  may vary with the underlying notes in the baskets  112 .  
         [0076]    In some industries, the standard terms for notes may be longer than in others, and this may lead to finance company  100  tending to offer longer term securities  114 . In some industries, the variability of the credit risk among buyer/obligor companies  102  may be greater than in others; finance company  100  may package notes  106  to produce a more marketable basket  112 .  
         [0077]    When finance company  100  sells a longer term security  112  backed by shorter term notes  106 , securities  114  will be backed by a continuous sale of new notes  106 . As a note  106  is paid off, finance company  100  may use the cash to buy new notes  106 . For example, if finance company  100  sells $100 of securities  112  today, the next time $100 of notes  106  were purchased from seller/obligee companies  104 , no more securities  114  would be offered to the capital markets  110 ; rather the cash would be used to buy new notes  106  to back existing securities  114 .  
         [0078]    Securities  114  may be tranched to allow different investors  110  to buy or exclude more or less risk. In some cases, securities  114  in the varying tranches may all pay periodic interest payments, with the tranches varying in their priority claims on payments made by buyer/obligor companies  102 . In other cases, securities  114  may vary in their tenor—the senior-most tranche has a claim on all cash flows from underlying notes  106 , until the securities  114  are paid off. Then the next tranche has a claim on all cash flows from notes  106 . The junior-most tranche may receive nothing until all other tranches are paid in full.  
         [0079]    III.G. Record-Keeping and Secondary Market  
         [0080]    Participants  102 ,  104 ,  110  may agree that the records of finance company  100  are the legally-binding records of ownership of notes  106 . The ease in establishing ownership and the ease of settlement engendered by centralized electronic storage of ownership information may facilitate the creation of a secondary market in notes  106 .  
         [0081]    The creation of finance company  100  by a consortium of high-volume buyer/obligor companies  102  and making a market in a class of notes of buyer/obligor companies  102  may effectively compel participation by sellers/obligees  104 .  
         [0082]    Improved availability and cost of funds for buyer/seller companies  102  and seller/obligees  104  may, improve the viability of a market in notes  106 .  
         [0083]    In some embodiments, the records of notes  106  may be stored in the form of “transferable records,” as that term is defined in UETA (the Uniform Electronic Transactions Act), or “authoritative copies” as that term is defined in §9-105 of the 1999-2001 revision of the Uniform Commercial Code. One example implementation of “transferable records” or “authoritative copies” is disclosed in U.S. Provisional Application for Patent Serial No. 60/264,590, filed Jan. 26, 2001, Steven Orrin et al., “Electronic Representation Of Obligations,” incorporated herein by reference.  
         [0084]    In other embodiments, the records of notes  106  may be recognized as the authoritative representation of notes  106  as a trade practice, or as a matter of contract among parties  100 ,  102 ,  104 .  
         [0085]    In some implementations, sellers/obligees  104  may, on request, obtain a conventional paper signed writing evidencing obligation  106  in exchange for, or in lieu of, the electronic record.  
         [0086]    III.H. Leveraging of Technological Infrastructure  
         [0087]    Finance company  100  may be especially efficient in a market where an organized electronic trading system for the underlying real goods is already in place among the businesses involved. With that trading system in place, the information to track the financial assets  106  may already be present in the computer systems in a relatively uniform format, and readily leveraged for use by finance company  100 .  
         [0088]    With finance company  100  and its technological infrastructure in place, participants  102 ,  104 ,  110  may be able to leverage that infrastructure to additional benefit. For example, the same technological platform and database used to transact the sales of goods or services that give rise to the notes  106  may be made available to sellers to offer their notes  106  to the financing vehicle  100 , and to finance company  100  in evaluating and agreeing to include such assets in an offering  114 . The connection of these databases and sharing of information may permit the instantaneous calculation and display of price that seller  104  could receive for its notes  106 , which might be based on the mix of notes that had been acquired so far in putting together a basket  112  for financing, but would not require significant re-underwriting or credit checks or evaluation of terms, etc. The use of the internet to create interlinked virtual markets may permit offers to be rapidly made and accepted with respect not only to purchases of goods but also the financing of the notes  106  generated by the sales, thus providing buyers and sellers with powerful new methods for determining whether a transaction makes sense. The use of cookies and of frequent updating of the information in the internet server may permit the network to make trading decisions at computer trading speeds.  
         [0089]    Finance company  100  may have access to read the electronic records that constitute the receivables  106  generated in the marketplace and authority to transfer or mark the receivables  106  as necessary to finance the receivables  106  once a seller/obligee  104  has chosen to do so through finance company  100 .  
         [0090]    III.I Secondary and Derivative Markets  
         [0091]    The securities issued by finance company  100  to capital markets  110  may spawn a secondary market, and markets in derivatives. Finance company  100  may trade in derivatives to hedge its own risks. Finance company  100  may use structured notes and derivatives in order to rebalance a basket  112 . For example, if a basket  112  has a misallocation, a 70% A/20% B/10% C allocation instead of a desired 60%/20%/20% allocation, finance company  100  may buy and sell structured notes and derivatives to rebalance basket  112 , to bring up the 10% and bring down the 70%. Buyer/obligor companies  102  might establish an inter-bank arrangement among themselves to mitigate misallocation risks and maintain that efficiency. For example, buyer/obligor companies A, B and C may have an inter-bank arrangement with notes or obligations on “deposit” with finance company  100  (finance company  100  may act in a manner analogous to an issuing agent). Finance company  100  may have the right to takedown $10 of obligations of buyer/obligor C and use them to “purchase” for C&#39;s account $10 worth of obligations of buyer/obligor A from basket  112 . By replacing obligations of A with obligations of buyer/obligor C in basket  112 , basket  112  may be brought into better balance. By maintaining an efficient mix and efficient pricing, these activities of finance company  100  may benefit the whole market. Similarly, this arrangement may ameliorate injury to the other buyer/obligor companies in cases where C may not be generating its expected share of market obligations and therefore may be the cause of the inefficiency.  
         [0092]    Parties  100 ,  102 ,  104  may have agreed procedures for. Finance company  100  may have other trading management and balancing mechanisms to keep the flow of securities near a desired mix of buyer/obligor  102  obligations into this vehicle, to mitigate interest rate risk (between the rates borne by the securities issued by the finance company and the receivables) and currency risk. For instance, finance company  100  may manage the types of securities issued, and/or may use derivative transactions, total rate of return swaps and credit linked notes, credit enhancements, interest rate exchange agreements and currency exchange agreements.  
         [0093]    Finance company  100  may use traditional lending methods to obtain liquidity and to deal with aggregation risks (e.g., the collecting of enough notes proposed for financing prior to a securitization by the financing organ).  
         [0094]    IV. Improved Credit Information, Relationships with Rating Agencies  
         [0095]    A closed system of buyer/obligor companies  102  and/or seller/obligee companies  104  may reduce the need to diligence the credit of account parties. This may further reduce transaction costs below those that would obtain in a transaction where a an intermediary, e.g., an investment bank, has no special prior knowledge of the buyer/obligor companies. Obligor companies  102  may have incentives to provide and update their credit information with finance company  100 , to improve the evaluation given by rating agencies. This additional information may allow other parties to more correctly evaluate risks, and more accurately price the transactions. Rating agencies may be allowed to analyze a large specialized program and may design rating criteria specific to the program, creating new efficiencies.  
         [0096]    Finance company  100  may have more knowledge about the assets and the buyer/obligor companies  102  than any other lender, and may be able to use that information to aggregate the collateral and mitigate concentrations in ways unavailable to other lenders. For example, in cases where finance company  100  is constituted by buyer/obligor companies  102 , the relationship between buyer/obligor companies  102  and finance company  100  may be less adversarial than the traditional relationship between an obligor and its finance agent, and a buyer/obligor  102  may be more forthcoming with certain information. For example, if buyer/obligor were to contest its obligation on a note  106  (e.g., that the note is not due, or some other defense), that information might be made available to finance company  100 , so that finance company  100  would not offer the contested note to the capital markets  110 . In some cases, a consortium agreement amount buyer/obligor companies  102  may require such disclosure, and/or finance company  100  may have resources to validate the claim. Accordingly, finance company  100  may be able to provide financing for the assets more efficiently than any other lender. In doing so, finance company  100  may be able to pass back to buyer/obligor companies  102  and/or seller/obligee companies  104  some of the advantage and pass some of the advantage to the sponsors in the form of program fees and arbitrage profit.  
         [0097]    The financing provided by financing company  100  may be sufficiently attractive to buyer/obligor companies  102  or seller/obligee companies  104  to create extra incentives for them to remain in good standing in the virtual market, and to fully and timely perform their obligations as sellers into the securitization program of finance company  100 .  
         [0098]    The known criteria and closed universe of obligors (buyer/obligor companies  102 ) may permit specialized lending criteria. For example, advance rates may be established for each buyer/obligor  102  on a stand-alone basis, and for various baskets  112  of members&#39; obligations. Seller/obligee companies  104  making sales and turning to finance company  100  for financing may be offered immediate loans based on the advance rates (an “advance rate” is the percentage of par that a lender will lend against an asset. For instance, most real estate loans require 10% down, which is the same as a 90% advance rate) applicable to the subscriptions then in the system (e.g., there may be sufficient requests for advances in the queue that loans can be made at a more favorable advance rate). If a given advance rate is not efficient at the time of request (e.g. due to a lack of subscriptions for loans), seller/obligee  104  may be allowed to put its name on a list waiting giving it priority over others for entry of its notes into a new basket  112  that is being aggregated for securitization or a derivative or structured financing.  
         [0099]    For the convenience of the reader, the above description has focused on a representative sample of all possible embodiments, a sample that teaches the principles of the invention and conveys the best mode contemplated for carrying it out. The description has not attempted to exhaustively enumerate all possible variations. Further undescribed alternative embodiments are possible. It will be appreciated that many of those undescribed embodiments are within the literal scope of the following claims, and others are equivalent.