The challenge

Lenovo needed to restructure its existing trade receivables securitisation programme. However, the process would result in Lenovo being unable to utilise the programme for an expected timeframe of approximately three months.

As such, BNP Paribas’ Hong Kong branch was requested by Lenovo to provide a one-off short-term funding solution that would bridge the time gap during this restructuring period.

The solution

Lenovo secured a US$965m one-off bridge receivables purchase programme, comprised of 11 sellers domiciled in different countries (namely France, Germany, Italy, Spain, Sweden, United Kingdom, Canada, United States, Australia, Japan and Hong Kong). With 45 buyers, invoices denominated in seven currencies were given up to a maximum tenor of 185 days.

Given the complexity of the numerous counterparties involved and in various geographies, Lenovo required a technology-enabled solution to ensure that all operational processes were streamlined and standardised.

Notably, the programme facilitated Lenovo’s key requirements, which were to:

• Enable Lenovo to achieve an off-balance sheet treatment of the receivables.
• Implement a quick and efficient solution with the aid of technology.

Best practice and innovation

Lenovo was able to structure and implement this highly complex and challenging opportunity in less than four weeks.

As the receivables due from the buyers are only insured for 90%, and the maximum liability of the insurer covers only approximately 48.9% of the programme amount offered, the bank would not be fully covered by the insurance in relation to the risk borne on the buyers. However, given Lenovo’s strong concentration of its pool of receivables, the bank provided the company with a 100% advance ratio and purchased the full amount of the invoices.

Receivables purchase agreements also allowed sellers to achieve the appropriate deconsolidation of the purchased receivables from the sellers’ balance sheets. In view of the number of buyers and sellers involved, Lenovo set up a system of consolidated maturity dates (CMD) as part of the structure of the programme.

In addition, and as part of the CMD process, all of Lenovo’s receivables which were due between Monday and Sunday of a given week were given a settlement date set as the Wednesday of the following week. This allowed sufficient time for reconciliation of monies received and invoices paid while also greatly reducing the operational workload and frequency of settlements.

By implementing the e-banking platform Connexis Supply Chain, it enabled Lenovo to facilitate a standardised operational procedure, despite the multiple geographies and entities involved, while also facilitating drawdowns by dematerialising the process.

The use of the platform also enabled the sellers to benefit from automated reports and reminders aiding the overall management of the programme. This technology-integrated solution therefore enabled a seamless and effortless management of the programme.

Key benefits

The main benefit was an accurate off-balance sheet treatment of the receivables sold to BNP Paribas by the 11 sellers under the US$965m programme. This brought a sizeable amount of liquidity to Lenovo, allowing it to be in line with its covenants under its various lending facilities.

There was now a quick turnaround time of less than four weeks. This allowed Lenovo to benefit from up to US$965m of liquidity in the three months bridge period, before the restructuring of the trade securitisation factoring services provided to Lenovo.

The company also benefited from the flexibility of legal documentation to add buyers without repeated execution of physical documents, thereby allowing Lenovo sellers to add buyers to fully utilise any available limits.

Finally, the use of Connexis Supply Chain provided Lenovo with an efficient and simple operational process, while allowing greater visibility and improved management on what would normally be a highly complex programme.