Capital goods in Asia are imported from multiple European countries involving multiple currencies and therefore the Importer was looking for a matching financing denominated in USD, EUR, and CHF.
Local debt is high cost and therefore for exports oriented units, any financing in foreign currency significantly reduces the cost of finance and increases the project viability
The company runs a 100% export Oriented Woven Fabric Cotton Yarn in Bangladesh and the company is publicly listed on Dhaka Stock exchange.
The company was in expansion phase and was importing capital goods from 9 countries wherein the suppliers were insisting on invoicing in the home currencies like USD, EUR, CHF with payment under Sight LC.
The company had approved local bank facilities from a large Bangladeshi Bank including Letters of Credit(LC) facility for providing sight LC to the suppliers and Local currency term debt facility or making payment under sight LC. However as the drawdown of the high cost term debt (to pay off LC) also triggered the start of repayment period of the loan, the company was exploring a cheaper foreign currency solution to delay the term loan drawdown while still paying the suppliers at sight to improve project returns. The ideal solution would have been a multi currency financing solution with a structure that delayed the drawdown of high cost local currency term debt to improve the project returns.
The company registered with ‘Interlinkages Online’ to arrange a solution called Usance Payable at Sight (UPAS) for availing 360 days financing period while suppliers got paid at sight in matched currencies This helped in arranging credit for 360 days without drawing down on high cost local debt.
The cost saving for the company was abour 1.5% per annum cleaper from other alternative sources specially due to EUR and CHF cost of funds.
Through Interlinkages online, the company connected with Six financing banks across Switzerland, Spain, Italy, India and Dubai for EUR, USD, CHF financing with individual invoice values ranging from USD 67,000 to CHF 2.3 million
The financing quotes were arranged within 3 days for all the deals and the service team of Interlinkages supported the closure of the deal end to end including draft document negotiation with the financing banks.
We were introduced to this novel concept of financing through Interlinkages online platform over a year back. Interlinkages has been able to structure our Capital goods UPAS (Usance Payable at sight) in a way that the project moratorium period has increased, leading to deferred repayment period of the term loan and longer repayment periods. We had invoices in CHF, USD and EUR and they provided the cheapest costs for the LC transactions. We recommend Interlinkages online especially to all the companies who are looking at innovative ways of getting competitive longer tenor financing.
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