Citi Trade May14

8/3/2019 Citi Trade May14

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Supply and Distribution Chain Solutions

Alternatives to Unlock Liquidity and Support yourFinancing and Working Capital Needs

in Todays Environment


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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


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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


Export LCsFinancing

Receivables Finance

Import Finance

Export Finance/Discounting Bills

Commodity Finance

Information

Electronic Delivery

Settlement


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


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Procurement Cycle: Supplier Finance

Working Capital Solution for Supply Chain


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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


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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


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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


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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


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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


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Sales Cycle: Receivables Finance

Unlock the liquidity potential of your receivables


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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


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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


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Negotiable Instruments Purchase

DistributionFinance

Single name Receivables

Purchase

Insured PortfolioReceivables Purchase

Concentrated LargeTicket AR Solutions

Portfolio Solutions

Accounts Receivable Finance Solutions


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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


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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


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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


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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


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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


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Appendix


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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.


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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


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Citi Trade May14

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