The Application Of Asset-backed Medium-term Notes On Pharmaceutical Distribution Business

Generally,China pharmaceutical distribution industry has high demand of capital raising which mainly focused on debt financing.With a low level of profit margins,pharmaceutical distribution companies have a high proportion of inventories and account receivables.In the meanwhile,such companies have lower bargain power with their clients,which results in large amount of account receivables.Therefore,it is essential to properly use account receivables to raise capitals.However,traditional financing methods to use account receivables cannot satisfy the increasing demand of companies.As a complement,the application of ABN(Asset-backed medium-term notes)has widen financing resources to pharmaceutical distribution industry.Combining experiences from developed countries and domestic economic background,official guidance has launched in China and ABN has been put into practice since August 2012.Based on the case of Kyushu Tong Medicine Ltd,this report is aimed at providing insights to the application of ABN on the pharmaceutical distribution industry.Initially,literature reviews of ABN and the current condition of account receivables financing are given in this report.Then the background of the Kyushu Tong ABN case is introduced.From the perspective of the issuer,the following aspects are assessed: the effect of financing,characters of underlying assets,risk control measures and the accounting treatment.To summaries,the application of ABN can save costs of capitals and provide long financing periods for companies compared to other financing methods.Moreover,it can improve the structure of assets and optimize the company's financial position.Based on above analysis,this report gives several advices to improve the implementation process of ABN and provides insights for the management of pharmaceutical companies to decide financing methods.