Home > Features and Commentary > In brief > Export Credit Office, BNZ help K9 Natural Foods fund US deal
Dog food producer and exporter K9 Natural Foods has secured trade finance to deliver on a substantial distribution agreement in the United States, with assistance from the New Zealand Export Credit Office (NZECO) and the BNZ.
The buyer, a profitable NASDAQ listed company, demanded credit terms and K9 was left with the predicament of how to fund their short term working capital requirements as well as mitigate the risk of non payment.
“We were faced with three options; accept the US terms and go through another round of time consuming equity capital-raising, walk away from the order, or preferably, obtain trade credit insurance and use it to access trade finance from a bank,” K9 Natural Foods Chief Executive Calvin Smith said.
The company turned to Treasury-based NZECO after it was unsuccessful in securing private trade credit insurance.
After assessing the credit risk, NZECO issued a short-term trade credit insurance policy that underwriting 80 percent of the credit offered to the US buyer.
NZECO Manager Carmen Moana said that K9’s situation was typical of smaller exporters that wanted to use trade credit insurance to mitigate repayment risk and as a tool to access finance.
“Smaller exporters may be unable to obtain credit insurance from private providers because they may only have one buyer on credit terms, or they may not have yet reached a suitable size. We’re pleased that we can fill this market gap and underwrite the deal K9 has made with its US buyer,” Moana said.
K9 subsequently negotiated to have the policy assigned to the BNZ, so that it could unlock up to $1m of finance for K9’s working capital requirements.
“The NZECO has been incredibly easy to deal with, and their support was critical in enabling us to get additional trade finance from the BNZ,” Smith added.
K9 was launched by founders Geoff Bowers and Bruce Mayhew in 2006, and is targeting sales of $5m this year and 300 percent per annum growth in the next two years.
Getting insurance for export transactions has become more difficult, but the government is looking to help.
17 August 2010
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