Case Studies

Overview:

A reputed company based in Sharjah, United Arab Emirates, that offers construction supply materials to a long list of consumers across the world. They recently have acquired a business deal with a client in China and in consequence, they were required to present a bank guarantee to assure the legitimacy of the deal.

Solution:

The company was able to reach out to our branch in Dubai; Yield4Management FZE, to attain assistance with the bank guarantee they require.

Implementation:

Company met with Yield4Management FZE's Chairman - Mr. Sanjeev Chadha, and discussed the specifics of the bank guarantee they require. Yield4Management FZE delivered a draft BG tailored to in favor of supplier on behalf of the company needs and purpose. And, after the approval issued it through SWIFT and received by the supplier.

Results:

Client has successfully conducted and concluded their newly acquired deal.

Overview:

General Trading company delivers supplies, services, procurement, fabrication, construction, maintenance and project management solutions to governments, NGOs and Oil & Gas sector Clients in diverse industries around the world largely in Middle East, South Asia and Africa. They came to our branch in Dubai in need of a Letter of Credit.

Solution:

The Director of Texas General Trading company approached our Dubai office for a Letter of Credit to be issued to their beneficiary in the USA and the materials to be shipped to their client in Jordan.

Implementation:

After a brief discussion of the specifics of the letter of credit they require, Yield4Management FZE delivered a draft LC based on the preferences of General Trading company. Yield4Management FZE issued a Letter of Credit in the name of General Trading company through SWIFT directly to their beneficiary's bank in the USA. After issuance of the instrument, they had an unexpected interference with their business transaction. Thus, the issued Letter of Credit would have to be amended to replicate their transaction's modified documents. Yield4Management FZE resolved the matter by issuing an MT707 or an Amendment to a Letter of Credit tailor-made to the preferences of General Trading Company.

Results:

General Trading company has successfully conducted their business with their US based supplier and the commodities were delivered to their client in Jordan.

In the fall of 2015, a South African construction company ("Construction Co") reached out to us about issuing a Bank Guarantee on their behalf. Shortly before, a South African government body submitted a Request for Proposals to contractors in South Africa – the project was for construction of a new office building. Construction Co had the ability to complete this project and planned to submit a proposal but the government required a bond or guarantee to accompany any proposal.

The Problem

Despite its ability to complete the project, Construction Co did not have the capital to put up for a bid bond of 800,000 ZAR which was necessary for the government to accept their proposal. Such a bond requires a 100% collateral deposit. To obtain adequate funds for the deposit, Construction Co's owner, Winston tried to take out a loan for 800,000 ZAR. Despite the straight forward nature of the project, Winston's requests were denied because he lacked sufficient credit history. Speaking with the government project leaders, Winston learned that they would accept a partial payment or deposit of 30% if Construction Co could provide a guarantee from a reputable bank.

The Solution

After some research, Winston reached out to us looking for a guarantee. Having worked on many projects like this in the past, we knew we could help Winston win the request. After proper due diligence, we issued Construction Co a Guarantee from a top bank. Using this instrument to meet the government's requirements for proposals, Winston was able to secure the project for his company. Satisfied with our services, he returned to us several times for Guarantees and Documentary Letters of Credit to finance Construction Co's projects.

A few years ago, a small, medical technology firm ("Back Co") sought to issue a Bank Guarantee or Standby Letter of Credit to help them negotiate a tense situation with their supplier.

Back Co sells a single product: A kit consisting of implants for spinal fusion surgery. Like its competitors, Back Co's kits consisted of several dozen parts that the doctor could choose from during the operation. The parts were necessary due to the sensitive nature of the surgery because slight differences in spinal segments from person to person would require different implants. Back Co's kits where costly, but allowed doctors to perform successful spinal fusions on virtually all patients. Usually, hospitals ordered these kits in large batches schedule for earliest possible delivery. Upon receiving an order, Back Co would obtain all necessary components from its various suppliers and, upon receiving the components, would package and send the kits to their customers.

In order to become more competitive, Back Co decided cut down on lead time. The lead-time on this process was usually at least several weeks although the customers preferred immediate delivery. Back Co's management team realized that if they had the kits available on hand (i.e. in inventory), they could ship to their clients within days of receiving a purchase order. Back Co used its available cash reserves and credit lines to procure storage space, and ordered enough supplies to cover their projected sales for the next quarter.

The Problem

Back Co soon realized that they were falling significantly short of their projected earnings that season. Cash flow was tight and some vendor payments had to be delayed. Usually, Back Co settled transactions with their largest supplier, a producer of medical screws ("Screw Co"), on an open account basis – Screw Co. was extending credit to Back Co.

by giving them payment terms on the cost of goods rather than requiring payment upfront or prior to shipment However, after failing to pay Screw Co on time, the supplier stopped extending credit to Back Co. and withdrew their payment terms until Back Co. could sell the inventory they previously purchased on open terms and pay down their balance with Screw Co.. In the absence of immediate payment, Screw Co wanted an instrument to help them secure their finances, even if Back Co did not sell its inventory.


The Solution Back Co's management team considered using a Bank Guarantee or a Standby Letter of Credit. After Back Co explained their dilemma to us, we deliberated and decided that a Standby Letter of Credit was the instrument best suited for this situation. By providing Screw Co a Letter of Credit from a top global bank, Back Co was able to continue operating without further straining their relationship with their supplier.

During the term of the Standby Letter of Credit, Back Co's sales grew, revenue increased, and they were able to pay Screw Co. in full by the time the instrument expired. By giving Back Co. time to sell their inventory without hassle from their supplier, the Standby Letter of Credit helped to ensure that Back Co. was able to repair its tense relations with Screw Co and to obtain credit from them in the future. Thus, Back Co's supply chain was not only maintained but strengthened because their supplier now had proof that Back Co. would work with them to handle tough situations in the future. This gave Screw Co. sufficient confidence to restore their faith in Back Co. and to reinstate their favorable credit terms.

Underwear Co was a small but stable underwear brand, popular in several eastern European countries. Recently, Underwear Co received a larger-than-usual order from a new client who needed the goods fast. In order to purchase the goods without tying up all of their cash flow, Underwear Co needed a Proof of Blocked Funds. Otherwise, they would have to use their reserve working capital at the start of production which would create unnecessarily inconvenient cash flow deficiencies. Underwear Co. was already our client, and had used our services to facilitate a number of previous transactions. Naturally, they came to us for help.

The Problem

Underwear Co was eager to meet this order. However, upon contacting their supplier, they learned that the underwear could not be manufactured in time. The manufacturer recommended that Underwear Co contact another, smaller supplier known for delivering high output with a quick turnaround.

The new supplier was ready to take on their order but realized that it would utilize 100% of its capacity to produce. They needed some way to trust that Underwear Co was capable of paying for the goods and not going to take the goods and run once they were produced.



The Solution

Universally accepted as the premier messaging platform for banks worldwide, SWIFT allows banks to send secured electronic communications and to transmit the issuance and confirmation of financial instruments. Underwear Co. discussed the transaction with their supplier and the supplier agreed because they were satisfied that the buyer (Underwear Co) had sufficient funds to pay for the goods and that tittle to the goods would not transfer unless and until payment was released.

After issuing the SWIFT message, Underwear Co's new issuer quickly accepted and produced the goods. Once the goods were produced, the supplier presented the documents to us to hold as collection items until the goods were paid for by Underwear Co. Underwear Co. paid the supplier by wire and we released title to the goods to them. Underwear Co was able to deliver its new shipment on time and has since continued to do business with the same client.

In this transaction, we used two popular tools – (a) proof of blocked funds and (b) Document Payment or Collection Item Facility – we hold documents until payment is made by the party who is seeking to purchase the items represented by the documents.

In 2015, a U.S. specialty outerwear clothing company (let's call them "Skin Co") inquired about our services. Skin Co was a major player in the garment industry for many years, with just over $20 Million in sales per year.

However, after one of their direct competitors went out of business, Skin Co received an unprecedented amount of orders, depleting their inventory and straining their capital to produce more inventory. If they could fulfill all these orders, Skin Co's annual sales would spike to $30 Million; a 50% hike in revenue.

The Problem

As the number of back orders grew, Skin Co realized that their current supplier, while flexible with payment terms, was at capacity and could not increase its output. When reaching out to other suppliers of the same caliber, Skin Co found that all of them wanted finances settled pre-production.

A supplier usually demanded 20-40% of the order paid upfront with the remainder to be paid just before shipment. A few suppliers mentioned Letters of Credit as an alternative to up-front payment.


The Solution

After spending a few hours online, the president of Skin Co, Jane, came up with a short list of Letter of Credit issuers and brokers who specialized in providing Letters of Credit at lower costs and without the stringent capital requirements necessary to obtain Letters of Credit from banks. After speaking with several of our account executives, Jane felt our instruments were more flexible and better suited than our competitors'. She was especially fond of the advice and attention provided by our hands-on financial and legal specialists and the greater options and opportunities afforded by our large network of financial and supply chain contacts and issuing institutions.

Jane made a deal with a supplier and we issued Jane's letter of credit within day of when Jane and her supplier agreed to the final terms of the Letter of Credit and gave us the order to proceed with issuance. The supplier accepted the credit and was able to borrow funds from their own bank by pledging the Letter of Credit as collateral. After producing and shipping the goods, the supplier provided us with the documents stipulated under the Letter of Credit's terms, including a Bill of Lading, Commercial Invoice, and a Quality Inspection Certificate. After all terms were satisfied, we paid the supplier on Jane's behalf.

By using our documentary Letters of Credit for the next few months, Skin Co was able to fill all the back orders and capture about 35% of its competitors' market share. By year-end, Skin Co reached their target of $30 Million in revenue.

In 2014, a large real estate developer (Build Co) reached out to us about our Bank Guarantees. Build Co manages several small scale residential projects in southern Italy, and has maintained its market share despite larger competitors due to high satisfaction among its clients.

For almost a decade, 70% of Build Co's revenue came from a single client, Apartment Co. Typically; Build Co finances their projects with Apartment Co using credit lines it maintains with local banks. The Problem

Recently, Apartment Co reached out to Build Co's CEO, Gregory, and asked him to develop a large residential complex on a waterfront property. This project was more than twice the size of any of Build Co's previous development. While Gregory trusted Apartment Co to pay in full and on time, he simply did not have the capital or credit to begin and complete this project.

Bankers and financial experts predicted that the proposed waterfront development project would max out Build Co's credit lines with just 20% of its total cost. When Gregory approached other institutions for financing, they demanded collateral or another form of security sufficient to cover the additional lines. Neither Gregory nor Build Co had enough collateral to sufficiently increase their credit lines.


The Solution

Gregory learned that one of the capital lending firms he was communicating with Bank issued Guarantees as security against loans. Greg learned of us through a friend of his whom previously used our Bank Guarantee services. Gregory took a week to decide his next course of action and decided to sign with us. We immediately issued the Bank Guarantee, utilizing our credit line with a top 10 global bank.

Gregory submitted the Bank Guarantee as security to his top prospective financier. The financier accepted the instrument and provided the necessary capital for Apartment Co's waterfront complex. Despite a small delay, Build Co completed the project and was paid on time. They in turn paid their financier in full and the deal was closed. Build Co has since returned to us for more Standby Letters of Credit and Bank Guarantees.