Group 2

Case Study: Lending

International Seafood CorporationCagayan De Oro Rubber Export, Inc.Low Interest Rate International Trading C

orporationAsian Rare Metal Corporation

Case Study:

International Seafood Corporation (ISC)

SUMMARY:

International Seafood Corporation (ISC)

Question 1 Risk Areas / Factors

Credit Risk – inability of ISC to repay the Bank for the funds borrowed

FX Risk – sudden changes in exchange rate of supplier’s currency

Production Risk – inability of suppliers to provide goods to ISC

Transportation Risk – possible loss / delay of cargo while in transit

Political Risk – risk of unfavorable foreign government action

International Seafood Corporation (ISC)

Question 2Questions to ask Ms. Cabral

Schedule and volume of remittances to supplier

List of suppliers, location, product supplied, and currency for payment

Who is the surety for the BDO loan of P5M?

ITR and FS for the past 3 years

International Seafood Corporation (ISC)

Question 3Loan Package

Omnibus Line ------------------- P 7.0M Available as:

Loan Line – For additional capital requirementsImport L/C – For importation purposes

Rate: Prevailing Regular Rate + 1% p.a.

Security: Surety Agreement Renewable Annually

Cagayan De Oro Rubber Export, Inc.

SUMMARY:

Cagayan De Oro Rubber Export, Inc.

Question 1Will you recommend the loan?NO, because..○CAPACITY of the BORROWER to pay is QUESTIONABLE since no business has been established yet

○Owner has NO EXPERIENCE in the rubber industry

○The project analysis is NOT ASSURANCE of success.

Cagayan De Oro Rubber Export, Inc.

Question 2Risk Areas / Factors○Credit Risk – inability of CDO Rubber to

repay the Bank for the funds borrowed○Liquidity Risk – CDO Rubber would not

have enough cash to pay off debt○Production Risk – inability of CDO

Rubber to supply goods contracted by buyer

○Business and Environmental Risk –

Cagayan De Oro Rubber Export, Inc.

Question 3Loan Package○Omnibus Line -------------------- P 10.0M Available as:

Loan Line – For additional capital requirementsExport BP Line– For export payment remittances

○Rate: Prevailing Regular Rate + 1% p.a.○Security: Parcel(s) of Land amounting to P10M; Surety Agreement with Father

Low Interest Rate International Trading Corporation

SUMMARY:

Low Interest Rate International Trading Corporation

Break Down:Regular Loan --------------------------------------

P25M

Import L/C Opened ----------------------------- 10M10M was converted to dollars with FX of 51.00

Export Negotiation ------------------------------ 15M

Deposit --------------------------------------------- 5M

APA Report

Asian Rare Metal Corporation

SUMMARY:

Asian Rare Metal Corporation

Question 1 Will you recommend the loan? YES, because…

The loan will be FULLY SECUREDMarket for cobalt is ESTABLISHEDNO SUBSTITUTE for cobaltThe business is already at its 5th Year, this would mean they are STABLE

The YES is conditional to regular monitoring of financials and a production report must be submitted annually

Asian Rare Metal Corporation

Question 2 Loan Package

Credit Line ------------------ P 10.0M

Rate: Prevailing Regular RateSecurity: Property in ZambalesRenewable Annually