ECI recovers payments from US firm filed for Chapter 11 bankruptcy restructuring
Massimo Falcioni, CEO of ECI.
Dubai - The US company has more than 100 years of history and owns the number one brand of down and feather bedding.
Published: Wed 13 May 2020, 1:12 PM
Last updated: Wed 13 May 2020, 3:21 PM
The UAE's federal export credit company - Etihad Credit Insurance (ECI) - has helped Safetex Group to recover a multi-million payments from Hollander, the largest worldwide producer of utility bedding products, located in North America.
The US company has more than 100 years of history and owns the number one brand of down and feather bedding.
Safetex's Emirates Fiber Industries plant in Ras Al Khaimah - the first to produce polyester staple fiber in the UAE via an automatic plant - was well positioned to supply Hollander's growing orders. Safetex gave Hollander an open account with a limit of $1 million. So what could go wrong?
Hollander filed for bankruptcy at the Southern District of New York. "On the midnight of May 18, 2019, I got a call from an Etihad Credit Insurance risk specialist, saying that Hollander filed for Chapter 11. That was a shocking news because all those days, I was talking to them, discussing new orders and shipments," recalled Muhammad Saleem Ahmed, Chairman and CEO of Safetex Group.
Fortunately for Safetex, its business transactions were already insured by ECI. Haitham Al Khazaleh, Risk Director of ECI, said: "Emirates Fiber had a multi-million-dollar annual business transactions with this buyer in the US, which is covered through a revolving limit by ECI. As the buyer entered into the Chapter 11 proceeding, ECI followed up immediately and worked with different legal partners in the US to secure part of the debt and make sure Emirates Fiber is considered a secured creditor. As a result, Emirates Fiber was able to recover a very important portion of the debt during the process and ECI has indemnified the difference and remaining unpaid balance."
"It could have been a huge setback enough to make us go bust. That coverage from ECI saved us from an impending fall at that time," Ahmed said.
ECI said that many overseas defaults are not being taken to court. Since credit transactions are often not covered, uninsured companies see the fact that litigation costs would only expend much of the sum at stake.
Massimo Falcioni, CEO of ECI, highlighted that collecting payments is SMEs' single biggest challenge in managing cashflow, while non-payments and bad-debts are two of the top reasons why businesses fail. And considering the COVID-19 implications in businesses, companies should be taking action in protecting their receivables, now more than ever.
"It is ECI's mandate as a federal company to support UAE businesses with solutions that meet their growth objectives locally and internationally," Falcioni said.
"Due to this global challenge, the strained liquidity in the market is creating a significant pressure on businesses and is increasing the likelihood of delayed and default on payments. My advice to companies is don't take chances. Credit insurance services offered by the UAE government through its export credit company are important tools for companies at all times, to ensure that businesses are secured and risks are mitigated."
In the case of Emirates Fiber, Ahmed noted that there were no telltale signs of bankruptcy when they were dealing with Hollander. "The payment was almost on time since they were asking regular orders," he said. "It was a big challenge not knowing the USA bankruptcy laws and dealing with the company, so was the time-zone difference and dealing with different people who we never encountered before."
ECI also has a global network of more than 360 million businesses worldwide, which enable it to assist in advising on available options and connect all UAE exporters and re-exporters to alternative suppliers to sustain their trade operations in the international markets.