A lucrative contract in the Middle East represented both a challenge and an opportunity for Ham Baker.
Stoke-based manufacturer Ham Baker has been keen to extend its success in the Middle East, where there has been increased demand for high-end engineering solutions. When it won a lucrative contract on STEP, a major tunnel enhancement project in Abu Dhabi, the company turned to us for support in meeting its upfront costs.
About the customer
Ham Baker designs and manufactures precision-engineered valves for the waste-water industry and supplies clients across the world.
Winning the contract to supply 18 knife-gate valves for STEP presented it with both an opportunity and a challenge. It knew it would need considerable upfront capital to fund the start of work and ensure that suppliers were appointed and paid on time. Guarantees demanded by the client also needed to be in place before work could begin.
How we helped
Ham Baker approached Ian Fletcher, international trade director, and Sukhvinder Bhogal, senior relationship manager, for assistance. Ian and Sukhvinder worked closely with the company’s directors to fully understand the requirements. Then, with the support of UK Export Finance (UKEF), they developed a mixed set of funding solutions, addressing each of the specific needs.
Bond Support Scheme
The contract stipulated that Ham Baker had to provide an advance payment guarantee (APG) bond for 10% of the total value and a performance bond for the same amount to cover the first 12 months. That meant £750,000 worth of bonds would have to be issued upfront to guarantee Ham Baker’s participation in STEP.
We approached UKEF with a view to using its Bond Support Scheme, which provides guarantees to banks issuing bonds for their exporting clients. These bonds would only be drawn upon in the event of a problem, but issuing them at the beginning of the project meant Ham Baker had the full confidence of its client and its suppliers.
Keeping cash flow on track
Ham Baker forecast that it would require pre- and post-shipment working capital of £2m to enable payments to be made to key suppliers. Under the Export Working Capital Scheme, an 80% guarantee was requested from UKEF, with the proposal that 100% of the cash received against the APG be released into working capital for the project. These facilities, along with the surety provided by the UKEF-backed bonds, have seen Ham Baker meet every project milestone so far.
“NatWest offered 100% payment terms to our buyers, financed the deal through its life and protected payments to our suppliers” Andrew Williams, MD, Ham Baker
NatWest offered 100% payment terms to our buyers, financed the deal through its life and protected payments to our suppliers.