Alternatives for Working Capital Financing - Deutsche Bank · Deutsche Bank Global Transaction Banking Deutsche Bank Advisory Day - 11 September 2014 – Accounts Receivables Purchase

Deutsche Bank Global Transaction Banking

Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin - Federal Financial

Supervisory Authority) and authorised and subject to limited regulation by the Financial Services Authority.

Details about the extent of our authorisation and regulation by the Financial Services Authority are available

from us on request.

Alternatives for Working Capital Financing

Break-Out Session – Deutsche Bank Advisory Day

Deutsche Bank

Global Transaction Banking

Deutsche Bank Advisory Day - 11 September 2014

Current Industry Trends:

2

Core Suppliers are increasingly gaining strategic importance

for producers of goods and services Interdependencies

Buyer / Seller relationships tend to have a global reach,

widening the scope for arbitrage opportunities between

business partners Globalisation

Many Corporates have recently launched company-wide

initiatives to improve Working Capital Management, start to

focus on the unused potential of Accounts Receivables and

Account Payables

Increasing focus

on Working Capital

Management (WCM)

Accelerating trend away from traditional trade finance

instruments towards open account settlement reduces

transaction cost but increases counterparty risk for

corporates

Open account

payments

Break-Out Session

Alternatives for

Working Capital

Financing

Presentation:

Bas Marteijn,

Head of Trade Finance

Deutsche Bank



3

Working Capital Components in focus of Supply Chain Finance

ROCE Return on Capital Employed

Break-Out Session

Alternatives for

Working Capital

Financing

Presentation:

Bas Marteijn,


Operating ROCE

Capital Employed

Sum of Assets

Fixed Assets

Net Fixed Assets

Financial Liabilities

Other Intangible Fixed Assets

Current Assets Inventories

Trade Accounts Receivable

Cash and Cash Equivalents Current Liabilities

Trade Accounts Payable

Current Bank Loans

Other Current Liabilities

EBIT

Deutsche Bank



4

Break-Out Session

Alternatives for

Working Capital

Financing

Presentation:

Bas Marteijn,


Accounts receivable finance

1. Delivery of goods/services

& submission of invoice

Supplier

3. Access to

accepted invoice

and request for

payment

5. Payment of

suppliers

4. Check of invoice

by DB

6. Payment of

invoice

at maturity

date

2. Check of invoice

and forwarding to

platform

Accounts payable finance

1. Delivery of goods/services

& submission of invoice

Buyer

2. Provides DB with

invoice data asking

for discount

3. Check of invoice

by DB

4. Payment of

original buyers

5. Payment of

invoice

at maturity

date

Workflow of a Financial Supply Chain Solution

Deutsche Bank



– Accounts Receivables Purchase is an optimal solution for corporates, who want to enhance their working capital management, reduce

concentration risk of buyers, increase liquidity generation or use margin arbitrage between buyer and seller rating and thereby enabling

mutual business growth.

– Deutsche Bank purchases trade receivables, originated out of commercial invoices after shipment, from our Client (seller) on a going

concern basis with limited or without recourse to the seller. 100% advance rate of receivables, discounted based on matching CoF + a

margin. Tenor of the Accounts Receivables in general is maximized up to180 days.

– Deutsche Bank obtains the right of legal recourse against the buyer through an assignment of the underlying receivable by the seller in

Deutsche Bank‘s favor. In case receivables are insured, insurance cover will also be assigned to Deutsche Bank.

– Depending on jurisdiction of the receivables, the credit approval for the buyer and the agreed conditions in the underlying contract the

assignment will be disclosed to the buyer and the buyer will directly pay to Deutsche Bank on due date. If not the seller acts as a

collecting agent for Deutsche Bank.

– Leverage Deutsche Bank international network: Account Receivable Purchase Program easily expandable across the globe!

– Advantages for the seller:

Receivables converted into cash upon shipment through optimized Working Capital Management.

Receivable Purchase is an additional source of funding without using own credit lines and providing transaction-related collateral.

Funding is matched to the seller’s sales made to approved buyer.

Ability to de-risk your trade receivables on approved buyers.

Improvement of balance sheet ratios and working capital.

Increased sales due to broader financing opportunities and a better negotiation position.

Recurring cost reduction due to decrease in bank debt.

Lower Capital employed, decreased interest and lower debt result in increased equity value and Return on Capital Employed.

Receivable Purchase Break-Out Session

Alternatives for

Working Capital

Financing

Presentation:

Bas Marteijn,


5

Deutsche Bank



– Payables Finance is an optimal solution for our corporate clients (buyers), who want to enhance their working capital management,

increase liquidity generation, improve trading partner relationships and thereby enable it business to grow.

– Deutsche Bank provides financing to key suppliers of our Client, by using available credit lines on the Client.

– When the Client approves invoices, the confirmed payables will be sent to Deutsche Bank.

– Deutsche Bank will provide the information of the confirmed payables to the supplier and the supplier may request Deutsche Bank to

purchase the receivables.

– Deutsche Bank has legal recourse on the Client through an assignment of the underlying disclosed receivable by the supplier in Deutsche

Bank's favor.

– Deutsche Bank discounts the receivables of the supplier upfront and collects the repayment from the Client on due date. Maximum tenor

of 180 days.

Confirmed Payables / Supplier Finance Break-Out Session

Alternatives for

Working Capital

Financing

Presentation:

Bas Marteijn,


6

Deutsche Bank



– Benefits for the Buyer / the Client:

Improved negotiating position regarding purchase prices / terms of payment by offering attractive financing to the supplier.

Creation of additional liquidity due to longer payment terms and improvement of key indicators (WCM, EBIT, ROCE, interest

expenses); credit lines for Payables Finance shall not arise as bank loans in balance sheet.

Closer relationship with strategically important suppliers, securing of supplier capacity and financing of common growth targets.

Flexibility in choice of suppliers and program size.

Option to join our electronic platform at a later stage without changing the complete legal documentation.

– Benefits for the Seller:

Promotion of sales volume by extending payment terms.

Additional source of liquidity without utilizing own existing credit lines.

Positive effect on important indicators / figures because of expected true sale of receivables (equity ratio, DSO ...).

More favourable financing in comparison to current account financing or factoring and by using a positive gap in the risk rating of the

buyer.

Cost savings by replacement of credit insurance possible.

Elimination of debtor risk and avoidance of concentration risk.

Full flexibility by individual selection of invoices for discount and date of discount.

Accurate cash flow planning possible.

Advantages Confirmed Payables / Supplier Finance Break-Out Session

Alternatives for

Working Capital

Financing

Presentation:

Bas Marteijn,


7





from us on request.

Optimizing funding strategy of a company – tapping from different sources


Deutsche Bank



9

Break-Out Session

Optimizing funding

strategy of a company

– tapping from different

sources

Presentation:

Diederik Kolfschoten,

Head of Structured

Finance

Working Capital Solutions

Debt Capital Markets

Private: SSD and USPP

Public: High Yield, Corporate Bonds

- Receivable Purchase

- Asset-based Financing

- Supply Chain Solutions

Subordinated Debt

-Mezzanine, 2nd Lien Debt

-Unitranche

Senior Debt

-Private Debt Funds

-Institutional Investors

Mid- / Large Cap Companies

Asset Based Financing

- Borrowing Base / Factoring

- Lease

Crowd Funding / Credit Unions

- Investeringsplein.nl

- MILK crowdfunding

- NPEX (bonds)

Equity

-Private Equity Firms

- NPEX (shares)

- Regional Development Companies

Goernmental Programmes

- Mezzanine funds / informals

- Regional Development Companies

SME Companies

Overview of Alternative Funding Solutions

Governmental Programs

- BMKB / GO

- Finance for International Business

Subordinated Debt / Mezzanine

Equity

- IPO

- Convertible

Subordinated Debt / Mezzanine

Deutsche Bank



Setting the Scene for Alternative Funding Solutions

Almost 80% of corporate debt funding in the Netherlands is provided by banks.

Basel III / CRD IV requirements impose capital constraints on financial institutions.

Quantitative Easing of the ECB/Fed has significantly lowered (short-term) funding costs and created an

abundance of short-term liquidity.

Banks have tightened their lending standards, creating liquidity squeezes for selected sub-investment

grade companies, in particular in the SME segment.

10

Break-Out Session

Optimizing funding



sources

Presentation:


Head of Structured

Finance

Deutsche Bank


11

Average margin by rating range Loan tenor evolution

Commentary

– Across EMEA, pricing has been falling dramatically as banks

compete for business in a low volume environment

– Since 2009 pricings on IG facilities have become increasingly

differentiated by country given the sovereign debt and macro

related fragmentations of European loan markets.

– Current primary loan market conditions are very strong, driven

by (1) Investor fund inflows; (2) Lack of new issue supply

relative to demand; and (3) Less attractive secondary market

valuations.

EBITDA multiples in leveraged loan market

0%

10%

20%

30%

40%

50%

60%

70%

80%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

< 1 year 1 - 3 years 3.1 - 5 years 5.1 - 9 years

0

100

200

300

400

500

600

Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014

(bps)

AAA/AA A BBB BB

5.2x 5.4x 5.9x

5.1x

4.1x 4.2x 4.4x 4.5x 4.7x 5.3x

0x

2x

4x

6x

8x

2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q14

First lien/EBITDA Second lien/EBITDA Other debt/EBITDA

In the mean time.....


Break-Out Session

Optimizing funding



sources

Presentation:


Head of Structured

Finance

Margins have steadily

dropped in recent years

and are close to pre-crisis

levels...

...whilst average tenors

have been extended...

...and leverage multiples

have increased





from us on request.

Step 1 in alternative funding: Operational Excellence


Deutsche Bank



13

Break-Out Session

Step 1 in alternative

funding: Operational

Excellence

Presentation:

Edwin Hartog, Head of

Cash Management

Corporates

Operational Excellence

Transparency of cash flows

Mobilization of cash

Optimization of liquidity

Business Planning Treasury Planning

Improvement Working Capital

Decrease of Funding Need (25%)

Increase of Entreprise Value and Return on Capital Employed

Account/liquidity structure (Sepa 2.0)

Receivables Management

Regional /Global Platform

Local/ Regional /Global footprint

FX solutions

Suppliers

Receivables Structured Finance Alternative Funding

I

II

Deutsche Bank


The Deutsche Bank advantage Why choose us for Cash Management and Trade Finance?

14

Financial Stability

Stable business model between Transaction Banking / Retail Banking and

Investment Banking

Strong external rating (Moody’s A3, S&P A, Fitch A+)

Strong capital basis

Long history of commercial banking

Market-leading provider of best-in-class working capital solutions through

thought leadership and innovative use of technology assets

Structuring and problem solving culture

Influential driver of major industry initiatives

Flexible and customized payments and collections services

Market differentiating, high quality Trade & Cash services and implementation

channels for our clients

Proprietary global network of local customer service teams

Easy to use client access channels

Global footprint with Cash Management and Trade Finance operations in

47 countries and more than 190 locations

“Follow the sun” global operating model

Full relationship, sales, service and technology teams across our global

presence with full knowledge of clearing and settlement systems

Leading FX bank globally (15.67% market share in 2014)

World’s largest Euro clearing bank and #6 in USD clearing1)

Fully scalable platform and infrastructure to process large volumes

Average daily payment processing in excess of EUR 1.1 trillion2)

EUR 73.9 billion3) Trade Finance book

Innovative Solutions

and Expertise

Global Leadership

in FX and Clearing

Global Network

with a leading

European Position

Commitment to

Service Excellence

Reliable partner for

sound advice and

fresh ideas

providing global

market access

combined with

powerful execution

and excellent

service

1) Source: ECB, based on EURO payments through 'Target 2' and 'EBA EURO1‘,clearing system, CHIPS (March 2014)

2) Peak volumes Source: GTB Finance as of March 2014 3) Source: GTB Finance as of March 2014

Deutsche Bank Advisory Day –

11 September 2014

Deutsche Bank


Deutsche Bank global footprint

15

Asia Pacific

Australia

China

Hong Kong

India

Indonesia

Japan

Malaysia

Philippines

Singapore

South Korea

Sri Lanka

Taiwan

Thailand

Vietnam

Americas

Argentina

Brazil

Cayman Islands

Chile

Mexico

USA Africa/Middle East

Egypt(**)

Mauritius

Nigeria(**)

Pakistan

Saudi Arabia

U.A.E

Europe

Austria

Belgium

Channel Islands

Czech Republic

France

Germany

Greece

Hungary

Ireland

Italy

Luxembourg

Netherlands

Poland

Portugal

Russian Fed.

Spain

Sweden

Switzerland

Turkey

Ukraine

United Kingdom


The Global Transaction Banking division

of Deutsche Bank employs 4,627 people

and has a presence in 46 countries,

serves customers in more than 190

countries.

Deutsche Bank Advisory Day –

11 September 2014

“We aspire to be the

leading client-centric

global universal

bank”

Documents

Alternatives for Working Capital Financing - Deutsche Bank · Deutsche Bank Global Transaction Banking Deutsche Bank Advisory Day - 11 September 2014 – Accounts Receivables Purchase