Negotiating Credit Requirements

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Project Description

Challenge

  • The client was facing financial difficulties
  • The client’s incumbent supplier was not extending any contracts, thus requiring the client to switch providers
  • The client’s poor credit limited the potential supplier pool and drove requirements for collateral from the client

Energy Edge’s Value Add

  • The Energy Edge team brought a deep understanding of the credit risks a supplier faces
  • Using Energy Edge’s proprietary data and analysis, the team modeled both the mark –to-market and receivables exposure each supplier faced
  • Energy Edge leveraged relationships with key personnel at the suppliers to reduce the collateral requirements
  • Energy Edge also introduced a monthly pre-payment arrangement to further lower the collateral amount

Client Outcome

  • The client was able to secure an agreement with the supplier offering the most competitive pricing and favorable contract terms
  • The collateral requirements were reduced from a requested of $900,000 to a deposit of $330,000 and about $120,000 in monthly prepayment through negotiations
  • Total collateral reductions were $450,000