Controladora mabe was looking to build upon its strength in the domestic market by expanding overseas. At the same time, there was a need to improve the company’s balance sheet management and working capital position. In order to achieve this, the company was aiming to improve its Days Sales Outstanding (DSO). A receivables financing arrangement was thought to be the ideal solution but this type of arrangement was not widely available in the required currency, Mexican pesos.
Due to the strength of the existing relationship and the bank’s ability to tailor its trade finance products to meet mabe’s requirements, The Royal Bank of Scotland (RBS) was selected to provide an accounts receivable financing programme for mabe and its principle subsidiaries. The scheme operates on two tranches, both of which are booked offshore in RBS’ booking centre in Amsterdam:
Under the terms of the facility, mabe sells its receivables on a non-recourse basis. “The receivables are the results of sales of white goods to our largest and most reliable customers,” comments Roman Bieletto, Corporate Treasurer. “Eligible receivables for the uninsured portion are investment grade accounts debtors rated BBB-. For the insured smaller portion of the deal, Atradius Mexico (the credit insurer) covers 90% of the eligible receivables.”
The deal is structured as a revolving facility, with mabe acting as the service agent. Receivables with a maturity of up to 180 days are eligible to be purchased. When the purchase has taken place, a detailed listing of the receivables offered for sale is presented to the bank. Once payment has been received from the debtors, mabe credits RBS on the agreed payment date for the face value of the invoices purchased by the bank.
“By dramatically improving our working capital, the solution has enabled us to compete effectively at an international level and grow our business overseas.”
“On the supply side, we have successfully introduced over 60 of our core suppliers into the programme from countries including Mexico, Korea, India, Taiwan, Brazil and the US,” says Bieletto. “This enables them to view purchase orders and invoices online via the RBS trade portal, MaxTrad, which has significantly improved supplier loyalty, as well as reducing errors, discrepancies and delays.” The implementation of the accounts receivables purchase solution has also led to an improvement in DSO. mabe has been using this product since June 2008 to finance 90% of its eligible receivables.
“The deal is the first of its kind to be implemented in a non-standard currency (Mexican pesos) through RBS’s offshore booking centre in Amsterdam,” concludes Bieletto. “It is the first time any RBS global transaction services unit in the Latin American region has implemented this type of accounts receivable programme, and the deal has helped prove the bank’s ability to support local Latin American businesses through its global network.
By dramatically improving our working capital, it has enabled us to compete effectively at an international level and grow our business overseas.”
