8/3/2019 Citi Trade May14
1/23
Supply and Distribution Chain Solutions
Alternatives to Unlock Liquidity and Support yourFinancing and Working Capital Needs
in Todays Environment
8/3/2019 Citi Trade May14
2/23
2
Relevance in Todays Market
The lack of confidence in thefinancial market undermined short-termlending.
Corporate bond spreads in Europe
have more then quadrupled over the lastyear. Credit Default Swaps at all timehighs
Significant re-pricing of credit acrossall customers from SME/MME sectorthrough to major multi-nationals.
Pricing in Central and Eastern Europeis also rising as the effects of the creditmeltdown start to filter into theeconomies of the less stable emergingmarkets.
Capital Markets have shut down withnegligible to no securitization andcommercial papers activities
Credit Insurers have significantly cutlimits and increased pricing as claims
mount and re-insurers retrench
Corporates
Renewed Focus on Working Capital -Corporates looking for ways improveCash Conversion Cycle
Sourcing Strategy - Low cost countrysourcing- China, India, Central &Eastern Europe still relevant, butfinancing more critical
Trading Partners Corporates lookingfor innovate solutions to inject liquidityand working capital into the supply anddistribution chain
Governments
Various country-level and multi-lateralinitiatives to support Banks, SMEs andspecific Industries in an effort toreactivate domestic and cross-bordertrade.
Causes & Effects of Credit Crisis Market Reaction
Freeing up Working Capital SupplierFinance allows both suppliers andbuyers to efficiently manage theirworking capital cycle and reduce costs
Extracting Liquidity From Sales-Increasing focus on receivables basedsolutions as a means to generatefinancing
Improves Relationships Solutions
allow corporates to leverage theircomparatively stronger credit rating tomake liquidity available in a creditconstrained environment
Full Transparency - Through our web-
based electronic platforms, all partiescan view the status of their transactionsand predict cash flow on a real-timebasis
Addressing the Need
8/3/2019 Citi Trade May14
3/23
3
Citi Solutions across the Working Capital Chain
Settlement
DocumentaryCollections
Import LCs Standby LCs
Financing
Open Account
Supplier Finance
CommodityFinance
Information
ElectronicDelivery
Financing
Inventory Finance
Commodity
Finance
Settlement
DocumentaryCollections
Export LCsFinancing
Receivables Finance
Import Finance
Export Finance/Discounting Bills
Commodity Finance
Information
Electronic Delivery
Settlement
DocumentaryCollections
Financing Receivables
Finance
DistributorFinance
Financing
Distributor Finance
Risk Mitigation
Confirmations
TransactionProcessing and
SettlementFinancing Information
Risk Mitigationand Credit Enhancement
Production SalesProcure-ment Delivery TransportSupplier VendingDistribution End-User
1 2 3 4 5 6 7 8 9
PROCUREMENTSALES
8/3/2019 Citi Trade May14
4/23
Procurement Cycle: Supplier Finance
Working Capital Solution for Supply Chain
8/3/2019 Citi Trade May14
5/23
5
Enables Buyers to improve their commercial terms
with Suppliers
Enables Suppliers to accelerate collection of theirreceivables
Immediate non-recourse liquidity, eliminating creditand collection risk
Low-cost balance-sheet-friendly form of financing
ReduceDSO
De-linking the payment date from the collection date through a Supplierreceivables purchase to create a win-win for both parties
CollectionDate
Supplier
ProductDelivery
Date
PaymentDate
ExtendDPO
Buyer
Citi Supplier Finance (also known as Reverse Factoring or Confirming)
Working Capital as a win-winWorking Capital as a Zero-Sum Game
Extension of terms hurts Suppliers
Reduces liquidity and margins without anyincremental benefits
Acceleration of receivables is costly and limitedby Suppliers credit
Initiatives to renegotiate commercial terms oftendamage relationships
Friction in the relationship ultimately increasescosts to both parties
Supplier
ExtendDPO
ReduceDSO
In a commercial terms negotiation,Buyers and Suppliers have conflicting objectives
CollectionDate
PaymentDate
Buyer
ProductDelivery
Date
8/3/2019 Citi Trade May14
6/23
6
Targeted Spend: $ 1 bnPayment Terms: 60 - 180daysSuppliers existing cost of Working Capital Finance: x %Citi offer of Supplier Finance Solution: Currency LIBOR + spread = y %
Working Capital Loan at x%
Supplier Finance at y%Delivery,Invoice
60 - 120 days after delivery(Maturity Date)
$ 5.0 MM
$ 2.5 MM
$ 1.3 MM
90 Days
$ 3.3 MM
$ 1.7 MM
$ 0.8 MM
60 Days
$ 6.7 MM
$ 3.3 MM
$ 1.7 MM
120 Days
Every 200 bps p.a
Every 100 bps p.a
Every 50 bps p.a
Savings generated in the Supply Chain can be used by the Buyer to achieve:
Reduction InCost Of Funding
PaymentTerms
x %- y%,where x>y
Cash Discounts Extended Payment Terms Rebates
Support of Suppliers leads to Savings for Buyers Commercial Department and results in positive impacton Buyers Working Capital
Win-Win Partnership
8/3/2019 Citi Trade May14
7/23
7
Supplier Finance: Value Proposition
Helps make revision of sales terms more acceptable
Improve commercial terms without increasing cost to the supplychain
More control over your accounts payable
Improved cash flow by reducing working capital and relatedfunding costs
Improve relationships with Suppliers
Introduce visibility into the payment process
Support key suppliers through provision of sales-linked finance
Why should Buyers be interested
Attractive liquidity tool through early payment option
Conversion of accounts receivable to cash through attractivelypriced, non-recourse sale
Frees up credit lines to capture additional business with lenders
Positive working capital benefitsIncreased cash flow, reduced Receivables
Full payment transparency
Details on approved payments and their timing
Possible flexibility to request discounting at any time during thelife of the transaction
What is the benefit for Suppliers
Industry Sectors
Retail, Autos, Industrials, Consumer & Healthcare, Telecom
Countries (in EMEA)Turkey, Russia, Poland, Kenya, Nigeria, Egypt, Germany, Italty,Spain
Where are we seeing more demand
Treasurer
CFO
Purchasing / Procurement Manager
Payables Manager
IT
Who are the Key Stakeholders
8/3/2019 Citi Trade May14
8/23
8
Product Structure & Client Experience
9
Major European Clothing Retailer
Client Need
A solution covering multiple countries across Eastern Europe andNorthern Africa
Providing suppliers with a competitive source of financing whilstextracting costs from the supply chain
Client needed an internet-based solution for ease of access forsuppliers to request discounting
Citi Solution
A Supplier Finance Solution covering Hungary, Romania andTunisia
Integrated STP solution linking with clients ERP (SAP) system,providing visibility and flexible financing options for their suppliers
Benefits
Over 200 suppliers actively discounting through the program.
Our client has increased their payables by 15% and achievedworking capital savings in excess of 10MM.
Client Testimonial
Many of our vendors are now approaching us proactively to join the SF
program and take advantage of the competitive financing
Steps
1. Supplier ships goods and invoices buyer.
2. Buyer accepts and approves invoices and electronically instructs Citi to paysupplier on future due date
3. Supplier is notified via Internet (email and website) of payment and canchoose to discount invoice without recourse
4. Citi makes payment to supplier (Auto Financing/ Optional Financing)
5. Citi debits buyers disbursement account for full amount of payment oninvoice due date.
Supplier Finance Solution
Goods/Invoice
Request ForDiscounting
1
AcceptedInvoices
BuyerBuyer
32
4
5
SupplierSupplierSupplierSupplier
SupplierSupplier
8/3/2019 Citi Trade May14
9/23
9
Supply Chain Innovation: Citi Procure to Pay
InvoiceAutomation
Settlement viaPurchasing Card orACH
Integration withMasterCard Paylink
Gateway , whichprovides:
- Buyer Initiated P-Card Processing
- Rich RemittanceData
- Registry formanaging P-Cardand supplier bankaccount data
Settlement viaPurchasing Card orACH
Integration withMasterCard PaylinkGateway , whichprovides:
- Buyer Initiated P-Card Processing
- Rich RemittanceData
- Registry for
managing P-Cardand supplier bankaccount data
ElectronicPayment
Solutions
Working CapitalSolutions
ElectronicPurchase Orderand InvoiceProcessing
P.O. and Invoice
Status Reports Approval Routing
and Workflow
Paper to ElectronicInvoice Conversion
Contract
Compliance
ElectronicPurchase Orderand InvoiceProcessing
P.O. and InvoiceStatus Reports
Approval Routingand Workflow
Paper to ElectronicInvoice Conversion
ContractCompliance
SpendAnalytics
Supplier Finance
DiscountManagement
- Dynamic DiscountManagement
- Standard Terms
- Purchasing Card
Supplier analysisand paymentdecisioning
Supplier Finance
DiscountManagement
- Dynamic DiscountManagement
- Standard Terms- Purchasing Card
Supplier analysisand paymentdecisioning
DiscountOptimizationAnalysis
Supplier SpendAnalysis
P-CardOptimizationAnalysis
Maverick SpendAnalysis
Supplier
ConsolidationAnalysis
Consolidated viewof corporate spend
DiscountOptimizationAnalysis
Supplier SpendAnalysis
P-CardOptimizationAnalysis
Maverick SpendAnalysis
Supplier
ConsolidationAnalysis
Consolidated viewof corporate spend
Citi Procure to Pay is a global, integrated and modular solution for;
Comprehensive supplier enablement and supplier value added services across all modules
8/3/2019 Citi Trade May14
10/23
Sales Cycle: Receivables Finance
Unlock the liquidity potential of your receivables
8/3/2019 Citi Trade May14
11/23
11
Squeeze out liquidity from your receivables
In the current market environment, wheresecuritisation markets have tightened and unsecuredbank lines are mostly unavailable, unlocking liquidityhas become a significant demand from our clients.
Citis global footprint and its presence in more than
100 countries allows the delivery of customisedAccounts Receivable Finance solutions to our clientsacross the Globe.
Credit crunch need not to Crunch your company
Cash Conversion Cycle = DIO+DSO-DPO
Where:DIO = days inventory outstanding ; DSO = days sales outstanding ; DPO = days payable
outstanding
8/3/2019 Citi Trade May14
12/23
12
Accounts Receivable Finance: Value Proposition
Seller Benefits
Sales Growth
Enhance product distribution and grow revenue stream
Build greater client partnerships with sales channels
Inject liquidity into distribution channels
Scaleable, quickly deployable program across various countries;
Balance Sheet Management
Improve working capital and reduce DSO
Manage and improve Cash Flow precisely and efficiently
Risk Mitigation and bank limit utilisation
Limits overall commercial credit risk
Leverage existing bank lines (buyer risk, insurance)
Outsourcing of receivables management
Operational efficiency in the management of Accounts Receivable
Reduces overall administration and operating costs;
On-line management and transparency including dilutions, paymentactivities and history
Reduced Administration
Paperless office via electronic communication channel
Buyer Benefits
Enhancement of Liquidity and Working Capital Increases DPO
Low cost of capital
Reduced cost of working capital funding
Facilitates downstream sales
Supports sales to the end user (retailers or consumers)
Improved information flow
On-line management and transparency including dilutions,payment activities and history
Operational efficiency in the management of Accounts Payable
Reduces their overall administration and operating costs;
Reduced Administration Paperless office via electronic communication channel
Value Proposition
8/3/2019 Citi Trade May14
13/23
13
Negotiable Instruments Purchase
DistributionFinance
Single name Receivables
Purchase
Insured PortfolioReceivables Purchase
Concentrated LargeTicket AR Solutions
Portfolio Solutions
Accounts Receivable Finance Solutions
8/3/2019 Citi Trade May14
14/23
14
Structured Promissory Note Discounting
Seller: Need:
Commercial risk mitigation and derecognize A/Rs from the balance sheet
Buyer:
Need:
Efficient WC management with DPO extension
Gain additional liquidity from other than securitization or unsecured bank lines
Allow the Buyer to utilise the provided commercial credit limit with the Supplier for further transactions
Transaction Amount: $48MM, up to one year tenor
Citi solution to address the customer need: A/R purchase
A/R documentation: negotiable inst., P/N
Deal timefame: 4 Weeks
6
Buyer
3.4. Promissory No te
5. Payment at
maturity
Seller 1. Issuance of Promissory Note
Discounting
Payment at
maturity
2. Accepted PN
presented for
discounting
8/3/2019 Citi Trade May14
15/23
15
Unlock Liquidity for Large Ticket Receivables
Ongoing Relationships
Services and Invoices
AccountsReceivable
Notification
Accounts Receivable Purchase Solution
1
2
3
5 6
BuyerBuyerSupplierSupplier
SupplierSupplier
Client need
Major telecom manufacturer selling to global and country telecomoperators.
Unlock liquidity and risk mitigation for each telecom operator
Off Balance Sheet Financing
Citi Solution:
$150 million Non Recourse Account Receivable Purchase
Tenors up to 360 days
Irrevocable Payment Undertaking from Buyer
Available on a non-committed basis to three selling entities inAsia and Africa, with scope for accession of additional entities
Benefits:
Consistent global solution to client covering all regions
Cost efficient financing based
Cash acceleration to enhance working capital position
Steps
1. Supplier ships goods and invoices buyer.
2. Supplier offers receivables to Citi, Citi confirms purchase of receivables
3. Supplier notifies buyer of assignment of receivables
4. Buyer acknowledges assignment of receivables
5. Citi advances discounted funds to Supplier
6. Buyer pays Citi face value of invoices on maturity date
4
8/3/2019 Citi Trade May14
16/23
16
Grow Sales via Distribution Finance
Distribution Finance Solution
Invoice Accepted
AccountsReceivabl
e
Assignmentacknowledged
ManufacturerManufacturer
DistributorDistributor
DistributorDistributorDistributorDistributor
1
2 3
4
5
Client need
Major multinational tech company needed to inject liquidity intodistributor base
Aim: to support distributors to increase level of purchases
Programmatic approach required covering wide distributor network.
Citi Solution
$500 million Distribution Finance Solution
First loss deficiency guarantee support from seller
Benefits
Additional liquidity in the sales channel to allow stock accumulation increased sales
Seller support enables buyers to enjoy an arbitrage margin, inaddition to increased product margin (if earlier payment discountoffered)
Steps
1. Manufacturer ships goods and invoices distributor. Distributor accepts
invoices2. Invoices assigned to Citi by Manufacturer
3. Assignment of invoices acknowledged by distributor
4. Citi discounts invoices and advances funds to Manufacturer
5. Distributor pays Citi at maturity ; optional extension of payment terms
8/3/2019 Citi Trade May14
17/23
17
Leveraging Insurance to Unlock Liquidity
Credit Insured Accounts Receivable Solution
Co-Insured on
Insurance policy
CreditInsurance
policy
Shipment andInvoice
Payment terms
AccountsReceivable
SupplierSupplier
InsuranceCompany
InsuranceCompany
BuyerBuyer
1
2
3
6
4 5
Client Need Major manufacturer selling to distributors through multiple local
European subsidiaries.
Discount portfolio of domestic and export receivables with variablepayment tenors.
Client had an existing credit insurance policy.
Citi Solution
$100 million Credit Insured Accounts ReceivablePurchase Solution.
Based on insured buyer risk (No credit lines required onbuyer or seller).
Available on a non-committed basis for two selling entitiesin Eastern Europe
Structure has scope for accession of additional sellingentities
Benefits
Cost efficient financing based on the insured risk ofportfolio of buyers
Cash acceleration to enhance working capital position
Scope for Off Balance Sheet treatment under IFRSand US GAAP
Steps
1. Supplier ships goods and Invoices Buyer2. Accounts Receivable assigned to Citi by Supplier
3. Citi pays discounted funds to Supplier
4. Buyer Pays Citi on due date per original payment terms
5. In the event payment not received, a claim is lodged with the Insurer andInsurer pays Citi for Insured amount
6. In the event payment not received, Supplier pays Citi for the uninsuredamount and any payment dilutions
8/3/2019 Citi Trade May14
18/23
18
Weathering the financial storm
Supply Chain stability becoming imperative
Balancing working capital optimization and the health of your main trading partners iscritical
Innovative Supply Chain Finance Solutions can help address these needs by improvingoperating efficiency and generating liquidity
Experienced and reliable financing partners with a global presence are well positioned todeliver these solutions consistently across geographies
Thank You!!
Roque Damacela EMEA Trade Finance Head [email protected] +44 (20) 7508-1205
Bhavna Saraf Supplier Finance [email protected] +44 (20) 7500-6371
Imre Gorzsas Receivables Finance [email protected] +44 (20) 7500-7237
Preeya Shah Receivables Finance [email protected] +44 (20) 7500-9341
8/3/2019 Citi Trade May14
19/23
Appendix
8/3/2019 Citi Trade May14
20/23
20
EMEA Supply Chain Finance Platform - CitiConnect
Capabilities: Web-based user interface
Multi-currency paymentcapability
Visibility of accepted invoices to
all transaction parties
Flexibility for Sellers to opt forFinancing or Collectionservices
Facilitates online invoice
upload, approval andreconciliation process for bothSellers and Buyers
Ability to handle multipleformats (File Formats ISOXML, SAP-IDOC) directly from
ERP (H2H) Report Designer & Scheduler
CitiConnect is available inEnglish, Spanish, Italian, Polish,Turkish. German and Frenchbeing rolled out.
8/3/2019 Citi Trade May14
21/23
21
Asia Pacific Australia Bangladesh Brunei China Guam Hong Kong India Indonesia
Japan Kazakhstan Korea Macau Malaysia Nepal New Zealand Pakistan Philippines Singapore
Sri Lanka Taiwan Thailand Vietnam
Monaco The Netherlands Norway Poland
Portugal Russia Romania Slovak Republic Spain Sweden Switzerland Turkey Ukraine United Kingdom
Middle East Bahrain Israel Jordan Lebanon Oman Saudi Arabia United Arab Emirates
Africa Algeria Cameroon Congo Egypt Ivory Coast Gabon Kenya Morocco Nigeria Senegal South Africa Tanzania Tunisia Uganda Zambia
Latin America Argentina Aruba Bahamas Barbados
Bermuda Bolivia Brazil Cayman Islands Chile Colombia Costa Rica Dominican Republic El Salvador Ecuador
Guatemala Haiti Honduras Jamaica Panama Paraguay Peru Puerto Rico Trinidad & Tobago Uruguay
Venezuela
North America Canada Mexico USA
Europe Austria Belgium Bulgaria Channel Islands
Czech Republic Denmark Finland France Germany Greece Hungary Italy Ireland Luxembourg
Countries where Citigroup is active
Supplier Finance Capabilities
Key
Supplier Finance under Implementation
Trade Finance Offering
8/3/2019 Citi Trade May14
22/23
8/3/2019 Citi Trade May14
23/23