Venmark combined insured foreign receivables, domestic asset-based lending and standby letter-of-credit support to enable financing for a newly established international subsidiary.
The company’s international growth required more working capital, but concentrated foreign receivables were not initially acceptable collateral for U.S. bank lending. Its new overseas subsidiary also lacked the operating history and financial standing to obtain bank financing independently.
Venmark helped obtain trade credit insurance that made international receivables eligible for a U.S. bank borrowing base. It then arranged a $4.5 million domestic line of credit with a standby letter-of-credit sublimit, a $1 million capital expenditure line, and a $2 million foreign commercial bank line of credit supported by irrevocable standby letters of credit from the U.S. facility.
The company established $7.5 million in aggregate committed domestic and international credit facilities, comprising a $5.5 million domestic financing package and a separately documented $2 million foreign commercial bank line of credit. The foreign line was supported by standby letters of credit issued under the domestic financing, correspondingly reducing domestic borrowing availability; the full $7.5 million was therefore not simultaneously available as incremental liquidity at closing. Together with the separately documented $10 million investor-note refinancing, the multi-phase engagement represented $17.5 million in aggregate restructured and arranged financing commitments.
The challenge was not merely finding two willing banks. It was creating the credit support each bank needed to underwrite interconnected domestic and international facilities.
This financing work formed a subsequent phase of the same multi-phase engagement encompassing $17.5 million in aggregate restructured and arranged financing commitments: approximately $10 million in amended investor notes; a $4.5 million domestic commercial bank revolving line of credit (including a standby letter-of-credit sublimit); a $1 million capital expenditure line; and a separate $2 million foreign commercial bank line supported by standby letters of credit under the domestic facility. These were separately documented commitments, but the letter-of-credit support reduced the domestic credit available for other borrowings.