A Bahrain based construction company minimizes delays in customer payments and secures a large portion of its accounts receivable enabling it to access easier and better Bank financing while minimizing operational delays and interruptions.
Challenge
Following the steep decline in oil prices in 2014/2015, shareholders of a Bahrain based construction company were looking to hedge themselves against lengthy delays in customer payments as it was affecting their liquidity and ability to launch new projects.
Discovery
We were able to utilize our global network to structure ‘credit’ insurance in relation to the company’s Operational Risk Profile and find a global insurer willing to take on the risk. In addition, following our analysis of the company’s insurance, we advised the company to cancel certain insurance products it was purchasing as they were not yielding positive economic value to the company. This freed up cash that was tied to unnecessary spend on premium.
Impact
- A large portion of the company’s receivables was secured through insurance that would respond in the event customer payments were delayed by over 120 days or in the event of non-payment by customers.
- The company launched new projects with the confidence it had in the protection provided by its Operational Risk Swap.
- The company leveraged its insurance protection when it was seeking and negotiating Bank financing on the new projects, which resulted in a lower financing rate with better terms and conditions than what was commonly available in the marketplace.