Born again forfaiting

Copying and distributing are prohibited without permission of the publisher

01 April 2005

Forfaiting was invented as a means whereby exporters could offer credit to their importers and sell the debt receivables to a bank on non-recourse terms. With the improvement of economies in many emerging markets, importers can now often obtain local finance more cheaply, with the result that forfaiters are now looking for new sources of business. The growing need of corporates to boost liquidity by selling off their receivables provides one promising source. The dramatic rise of China as a major trading nation suggests another tempting avenue to explore. Michael Rowe investigates.

Speaking at a conference on forfaiting staged by the International Chamber of Commerce (ICC) in March in Paris, Patrice Tournus, global head of forfaiting at Calyon in France, pointed out that exporters still turned to forfaiting to cover country and commercial risk while extending deferred payment terms to their customers. However, there is now a new and more frequent need to meet demand from corporate finance departments to lower client exposure on the balance sheet.

Moreover, credit policy has become a key reason to sell down export receivables of all types, whatever the credit standing of the country or customer concerned. Also, importers need to obtain payment terms that help their cash flow situation. At the same time, they want forfaiting arrangements that will not tie up their bank credit lines. This means that forfaiters are now more and more taking on pure corporate risk under deals that dispense with...

You must be logged in to view this page. If you are already a registered user please log in. Alternatively, you can request a free trial or subscribe.

Already have an account?

Subscribers have unlimited access to all current and archive content. Start your subscription today - click on the button below.

Free trial

Taking a free trial will give you access to the latest news and analysis for two days (excluding some surveys and articles). Start your free trial today.