Indonesia Coal Trading Company Seeking Bridging Finance

Indonesia Coal Trading Company Seeking Bridging Finance

INTRODUCTION

The company is an investment holding company established for the purpose of trading coal and various minerals. At this juncture, it’s associated company in Indonesia; P.T.xxxx Indonesia is principally involved in coal trading activities.

xxxx wishes to increase the volume of its coal trading activities through partnerships with parties that are able to bridge finance the pre-shipment costs associated under a new coal sale and purchase contract. In return, xxxx is willing to give a return and payback to the investor equating to 2 times the money put in by the latter after 1 year.

PROPOSED PROJECT

xxxx is in the midst of finalizing a Coal Sale and Purchase Contract with a buyer from China for the supply of Gross Calorific Value 5800/5600 (“GCV 58-56”) coal on a monthly basis for tenure of one (1) year. The monthly shipment volume to the buyer shall be 60,000 Metric Tons (“MT”) with a tolerance level of surplus/ shortfall of ten percent (± 10%).

Terms of delivery shall be on Cost and Freight as Received (“CFR”) basis at a selling price of USD73.00 per MT and payment terms shall be via 60 Days 100% At Sight Documentary Letter of Credits. It must be noted too that FIRC shall be allowed to make partial shipment of the monthly shipment volume, allowing better cash flow management and control over supply, logistics and shipment arrangements. (Hereby collectively referred to as the “Proposed Project”).

As the Proposed Project does not entail ownership of any heavy machinery, funding requirement could be kept to a minimal. All that is required is the working capital requirements to finance the pre-shipment cost for each and every coal shipment. As the coal shipment shall be on a recurring basis, the amount required to fund the pre-shipment cost is more or less fixed, save for currency exchange fluctuations and cost inflation adjustments.
The estimated cost required to kick start the Proposed Project is USD2,040,000. This represents the cost to ship 30,000 MT of GCV 58-56 coal as partial shipment would be allowed under the Proposed Project. As xxxx does not have any track record with a bank to request for pre-shipment financing, the possibility of securing funding against the assignment of the DLC is remote.

This explains why a minimum funding requirement of USD2,040,000 is required to kick start the Proposed Project. However, once the shipment documents for the first 30,000 MT has been obtained and submitted for negotiation for the release of payment, the bank’s assessment for forfaiting the receivables due from the Purchaser would be different. As such funding for the next shipment of 30,000 MT of GCV 58-56 coal to the Purchaser would be easily addressed.

PROPOSITION TO BUYER

xxxx is prepared to part 20% of its shares for a consideration price of USD2,040,000. As explained above, the funds raised from the sale of those shares shall be utilized to mobilize the Proposed Project.
Return to the Buyer shall be as follows:

Payment of USD60,000 upon completion of every shipment X 24 shipments . USD1,440,000 .
Share buy back at the end of the Proposed Project X 1.3 times . USD2,652,000
Total Gross Return to Buyer USD4,092,000

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