GLOSSARY

Ocean’s proposition is simple.

We provide cash that enterprises can rely on for the long term.

We’ve aimed to explain how we do so with minimal jargon. This glossary explains some unavoidable financial terms as well as some we haven’t used, but you might have heard about. Many will be familiar to business owners, but it’s best to make sure we understand each other.

Assets
We all know what these are. Ocean is interested only in assets that are instrumental for your business—from trade receivables to raw materials, machinery and other inventory. We’re not interested in strategic assets that position your company ahead of competitors.

Asset-backed security
A security whose value and income payments are derived from and collateralized (or ‘backed’) by a specified pool of underlying assets.

Asset performance
Relates to the condition assets are currently in. This is measured through unique identifiers that include information such as face value, age, estimate of remaining life, accessories, and so on. These factors contribute to the value Ocean assigns your assets.

‘Balance-sheet, capital tied up in’
Refers to the equity or debt which is dedicated to finance the asset on a balance-sheet. Ocean aims to release the cash inherent in these assets.

Balance-sheet lending
This is our term for the process that enables us to advance you cash on your assets. You transfer your asset to the balance-sheet of our dedicated company.

Basel II
The second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.

Capital requirement
See ‘regulatory capital’.

Capital structure
The way assets are financed through some combination of equity and debt.

Consolidation
The state when a company’s balance-sheet includes all a company’s assets.

Deconsolidation
The result of ‘off-balance-sheet’ treatment.

Diluting your equity
Refers to the reduction of economic interest and control over a company following the issuance of new equity (see ‘equity’).

Equity
We use this term to define the shareholders’ fund, common equity or share capital. It is also the residual claim of the most junior class of investors in a collection of assets after all liabilities are paid.

Gearing
See ‘leverage’.

IFRS
International Financial Reporting Standards are accounting rules. A ‘principles-based’ set of standards, they establish broad rules as well as dictating specific treatments. They comprise:
• International Financial Reporting Standards (IFRS) - standards issued after 2001
• International Accounting Standards (IAS) - standards issued before 2001
• Interpretations originated from the International Financial Reporting Interpretations   Committee (IFRIC) - issued after 2001
• Standing Interpretations Committee (SIC) - issued before 2001

IAS
Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and SICs. The IASB has continued to develop standards calling the new standards IFRS.

Monetize
Used to refer to the process of converting some asset of non-monetary form into a monetary payment.

Leverage (also known as gearing or levering)
Refers to the use of debt to supplement equity in the capital structure. Companies use leverage to increase returns on equity as this practice can maximize gains (and losses).

Off-balance-sheet treatment
The state of which an asset that is used by a party under pre-agreed terms but that the ultimate control and beneficial ownership resides with a third party.

Regulatory capital
Or ‘capital requirement’ is a bank regulation, which sets a framework on how banks and depository institutions must handle their capital.

Securitization
A ‘structured finance’ process that distributes risk by aggregating debt instruments in a pool, before issuing new securities backed by the pool.

SPE or SPV
A special purpose entity (SPE)—sometimes, especially in Europe, ‘special purpose vehicle’ or simply SPV—is a legal entity (usually a limited company of some type or, sometimes, a limited partnership) created to fulfill narrow, specific or temporary objectives. SPVs are typically used by companies to isolate risks and to render a risk structure more readable to the lenders.

Structured derivatives
A technique used to transfer risk using complex and sophisticated legal contracts. This has nothing in common with Ocean’s approach to structured finance

Structured finance
A broad term used to describe a sector of finance created to help finance assets through limited recourse techniques. Pedro cut his teeth in the structured finance division at Paribas and Merrill Lynch banks. Today, Ocean helps enterprises navigate this world in an altogether simpler way. (Not to be confused with ‘structured derivatives’.)

Source: Wikipedia and Ocean

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