XYZ Inc. manufactures and sells machine tools with a large part of its sales coming from installment
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XYZ Inc. manufactures and sells machine tools with a large part of its sales coming from installment sales contracts. XYZ’s credit department makes decisions on extending credit, originating loans, and servicing them. XYZ has
$500 million installment sales contracts. It also would like to raise $500 million in new funds. Explain how XYZ would set up a special purchase vehicle to securitize its sales contracts as an alternative to issuing a $500 million debt issue. What are the advantages of SPV securitization by an SPV over issuing debt?
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