Citi Client Casebook Middle East and Africa 2022

Liquidity and Working Capital 16 Emirates Global Aluminium Off-balance sheet funding solution delivers working capital benefits for EGA Emirates Global Aluminium (EGA) is the world’s largest “premium aluminium” producer and the biggest industrial company in the UAE outside of oil and gas. We have been making modern life possible since 1979. The Challenge Emirates Global Aluminium (EGA) sought an off-balance sheet funding solution to meet its working capital requirements, driven by investments in new assets and a commitment to deliver returns to shareholders. EGA’s objectives were: • To optimise working capital in order to accelerate free cash flow, ultimately improving the return on invested capital (ROIC). • To maximise liquidity, on an off-balance sheet basis, from a receivable portfolio comprising a few large customers (in terms of receivable concentration) as well as 400+ clients in more than 40 countries across the globe. • To minimise “haircuts” taken on large concentrations, typically taken in traditional securitisation facilities, whilst maintaining a portfolio approach versus an individual risk underwriting approach to maximise the cost benefits of the solution. • To find a solution which would provide maximum flexibility. • To identify a tailor-made, off-balance sheet structure including innovative technology and host-to-host (H2H) connectivity. • To realise quantitative improvements in efficiency. The Solution EGA worked closely with its accounting advisors and Citi and adopted a receivables purchase facility of USD 460 MM, comprising two tranches (under a single master receivable purchase agreement) that also addressed larger receivable concentrations, as follows: Tranche A : a non-recourse bilateral receivable purchasing programme (individual underwriting of large credits) — 100% advance rate. Tranche B : non-recourse distribution purchasing programme — portfolio underwriting of a pool of 400 debtors, leveraging risk sharing with EGA and a bank guarantee covering the mezzanine portion with the final senior tranche covered by Citi — 100% advance rate. Given the significant facility size as well as to ensure scalability of the programme and within the spirit of managing partnerships for mutual success, working with EGA, other relationship banks were invited to participate. The H2H solution enables EGA to upload receivables for funding in an automated fashion. Additional reconciliation capabilities are also transmitted via H2H to enable EGA to close out the open accounts receivables and to send automatic non-compliance notifications and monitoring alerts. Digital front-end with full reporting capabilities, Citi’s digital distribution finance technology structure can also be harnessed for other working capital finance solutions such as supply chain finance (SCF). Highly Commended: Best Working Capital Management Solution Source: This was first published by Treasury Today Group