The client requested a US$22m working capital facility. Matrix Metals (MM)LLC, a wholly-owned subsidiary of Sanmar Engineering Technologies Ltd (SETL), has immense supply chain strength on account of its supplies to blue chip companies in the US. Rather than working out a bilateral loan to MM LLC, Deutsche Bank proposed a structure where MM LLC would harness the advantage of forging long-term relationships with these blue chip buyers.
Photo of Sunday Domingo of Deutsche Bank collecting the award on behalf of The Sanmar Group.
Deputy Managing Director – Finance
The Sanmar Group is a multinational $1bn conglomerate headquartered in Chennai, India and has manufacturing facilities in India, the US, Mexico and Egypt. Sanmar is engaged in three key business sectors namely:
in partnership with
US, Singapore and India join forces to deliver self-liquidating sales invoice financing solution backed by a corporate guarantee
The Sanmar Group wanted to implement a capital restructuring programme to attain cost and liquidity efficiency across all its offshore and Indian subsidiaries, requesting a $22m working capital facility.
One entity, Matrix Metals (MM) LLC, a wholly-owned subsidiary of Sanmar Engineering Technologies Ltd (SETL), has immense supply-chain strength on account of its supplies to blue-chip companies in the US. Rather than working out a bilateral loan to MM LLC, Deutsche Bank proposed a structure where MM LLC would harness the advantage of forging long-term relationships with these blue-chip buyers.
MM LLC had a revolver facility for its working capital requirement in the US. Due to the nature of its operation there, the company wanted a supply-chain facility where it could benefit from its strong multi-year relationships with US blue chip corporates. This approach would ensure that the facility would draw strength from its buyers rating and also improve the pricing of the financing.
Deutsche Bank structured a self-liquidating sales invoice financing solution backed by a corporate guarantee of SETL as well as an insurance policy triggered by default of MM LLC due to non-payment by its buyers. In order for the insurance policy to be successfully triggered, a floating charge on the receivables of MM LLC had to be created in Deutsche Bank’s favour.
The deal was a truly global one with teams across US (Matrix Metals and legal counsel), UK (insurance), Singapore (transaction booking and Deutsche Bank legal) and India (Deutsche Bank Trade Finance and Sanmar Group) working intensively across time zones for two months to successfully execute this mandate. The execution of the deal was also fairly complex, involving rigorous negotiations with the legal counsels of Deutsche Bank and MM LLC, syncing the facility documentation with the insurance policy wording and ensuring all covenants of Deutsche Bank’s credit risk team were appropriately captured.
The transaction level execution of the deal involved setting up of limits across more than 70 buyers of MM LLC as per insurance approvals and booking of sales invoices against these buyers. This mammoth one-time activity was carried out within extremely stringent timelines, ensuring that the disbursal was completed in a timely manner thereby repaying the previous banker’s loan and subsequent release of their charge on receivables.
Best practice and innovation:
Deutsche Bank demonstrated its ability to both think outside of the box and to successfully execute a complex and innovative transaction which consumed only 10% risk on MM LLC within stringent timelines. The bank was able to structure a financing solution and enhance counterparty risk by ring-fencing it using the dual-trigger insurance policy.
It was equally critical to ensure that a new lender was in place and that processes were agreed and set in motion across different geographies and that documentation was signed off. It was also necessary for the charge on the previous banker on MM LLC’s receivables to be released and a fresh charge created in favour of Deutsche Bank. All had to be carried out within stringent timelines, as did the execution of the transaction, with limits implemented across more than 70 obligors of MM LLC. “This solution is the result of true client-centricity and close coordination across various stakeholders,” comments R. Rangarajan, Managing Director, Finance, Sanmar Group.
Different source of financing replacing traditional working capital.
Establishing relationship with a new lender.
Flexibility and adaptability to business needs.
Improvement in pricing.