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Problem/SolutionPre-export Financing Problem: Having fully utilized its short-term bank lines of credit in India, a major Indian steel company requested Ecoban's help in creating additional means of financing their trade flow. Solution: Ecoban devised a financing structure that tied the future export flow of steel from the Indian company to its strongest buyers in Europe. To comply with Indian offshore borrowing regulations, the advance payments were arranged through Ecoban's own commodities trading company (Glenwood Trading) and tied to specific steel supply contracts between the Indian steel company and two premier European steel trading companies. This structure allowed Ecoban to generate more than $60 million of additional unsecured short-term (360-day) trade finance over a two year period, which Ecoban, in turn, participated out to six major international banks outside of India. U.S. EXIM Financing Problem: A leading high-tech software company in India is developing an on-line stock-trading platform for the Indian market. The overall costs for this project - including IBM and Cisco hardware and Oracle software - is expected to exceed $40 million. Local Indian banks are reluctant to offer long-term financing for such imports, so the company came to Ecoban for ideas. Solution: We suggested that our client take advantage of the under-utilized U.S. Export-Import Bank Medium-term Loan Guarantee Program to finance the equipment and software purchases. As a participating lender under this program, Ecoban makes three- to five-year loans available to qualified foreign buyers of eligible American capital equipment and services. Through our contacts at EXIM in Washington and our funding capability, the Indian software company may receive medium-term financing for the needed imports. Past Due Receivables Problem: A multinational telecommunications company agreed several years ago to sell equipment to certain Chinese importers on open account terms. Since then, some of these importers have become delinquent in their payables, so the supplier came to Ecoban for advice and help. Solution: Working through our Beijing and Hong Kong offices, we determined that these receivables could eventually be collected by accepting payment in either RMB or in the form of Chinese products. To do this, Ecoban needed a discount to cover its fees and transaction costs. Ecoban then purchased the discounted receivables in U.S. dollars. As a result, the telecom company was able to collect most of the receivables that they had previously considered uncollectable. Bridge Financing Problem: A U.S. export trading company contracted with a major Chinese steel company to sell certain steel-making equipment supplied by a U.S. manufacturer. The manufacturer needed ten months to make the equipment and required a letter of credit from the trading company to cover the payment. The trading company turned to the Chinese steel company for a master letter of credit; however, the Chinese company would not open the letter of credit until two months before the scheduled shipment. Faced with an eight-month financing gap, the trading company came to Ecoban for help. Solution: Working with all the parties involved, including the Chinese company's Chinese bank, Ecoban devised a solution to make the transaction possible. We substituted ourselves for the U.S. trading company and acted as a conduit between the manufacturer and the Chinese company. We took the risk that the manufacturer would both produce and ship on time, and that the Chinese company's bank would open the master letter of credit two months before shipment, as promised. Thanks to Ecoban's significant presence in China and our understanding of Chinese business and banking practices, the transaction was completed on time to the satisfaction of all parties involved. Credit Enhancement Problem: A leading Brazilian exporting company sought substantial amounts of medium-term financing that would not interfere with its normal banking relationships. Solution: Ecoban regularly works with U.S. surety bonding companies that guarantee the supply of goods or services under international dollar-denominated supply contracts. We first determined that the Brazilian exporter would commit to exporting products to international counterparts, with contract proceeds being paid in U.S. dollars into offshore escrow accounts. We then identified a leading investment grade bonding company that would take our client's performance risk. The deal was structured so that Ecoban could deliver medium-term financing in excess of $100 million against the guaranteed delivery of exports by the Brazilian company. Under this structure, Ecoban delivered substantial medium-term financing to the Brazilian borrower from new financing sources, without approaching the banking sector. Offset/Countertrade Fulfillment Problem: Without first consulting Ecoban, a leading aircraft engine manufacturer and exporter signed a Memorandum of Agreement (MOA) with the importing country's offset and countertrade authority to fulfill a $10 million direct offset obligation. The obligation required the manufacturer to subcontract out engine component work to an established company in the importing country. Over the next four years, the manufacturer tried to place the engine component work with a local manufacturer, who was not willing to produce the components until they were guaranteed additional business. This guarantee could not be made, and the U.S. manufacturer, facing a 10% penalty for non-fulfillment, turned to Ecoban for help. Solution: Through our local office in the importing country, Ecoban first arranged for the previous MOA to be terminated and, at the same time, negotiated the conversion of the direct offset obligation into an indirect offset obligation. This meant that the obligation could be fulfilled through new exports of "non-traditional" products from the country. It also resulted in an extension of the MOA to allow time for fulfillment. |
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