POSCO INTERNATIONAL Pioneers ‘Global Sales Insurance’ Security
In a landmark achievement, POSCO INTERNATIONAL has become the first company in South Korea to receive the ‘Global Sales Insurance (Securitization)’ security. This security is designed to bolster the financial stability of international trade transactions by providing a safety net for companies operating across global markets. POSCO INTERNATIONAL SINGAPORE PTE LTD, a subsidiary of POSCO INTERNATIONAL, is the first recipient of this innovative product, which marks a significant milestone in global trade finance.
The ‘Global Sales Insurance’ security was introduced by the Korea Trade Insurance Corporation (K-SURE) in collaboration with Deutsche Bank, offering a non-recourse financing model that allows companies to sell trade receivables without assuming the risk of default. Through this product, POSCO INTERNATIONAL is able to improve the financial condition of its overseas operations, reduce risks in international trade, and strengthen its competitive edge in foreign markets.
How the Global Sales Insurance Works
The ‘Global Sales Insurance’ product offers a unique solution to enhance the liquidity and financial stability of international businesses. It allows POSCO INTERNATIONAL to sell its trade accounts receivable to Deutsche Bank under non-recourse conditions. This means that even if the accounts receivable go unpaid, Deutsche Bank is responsible for the recovery, not POSCO INTERNATIONAL. The product works by purchasing trade receivables from POSCO’s overseas subsidiaries, ensuring they secure operating funds even before payments are collected.
This securitization process helps reduce the corporate debt burden, as it is structured as a sale, not a loan. By leveraging this approach, POSCO INTERNATIONAL can reduce its debt size and operate under more favorable financial conditions. The Korea Trade Insurance Corporation provides the insurance security to ensure stable funding for POSCO’s overseas subsidiary, while Deutsche Bank facilitates quick liquidity by purchasing the receivables. This partnership has significantly lowered interest rates and enhanced POSCO’s business competitiveness in international markets.
Financial and Strategic Benefits for POSCO INTERNATIONAL
By introducing the ‘Global Sales Insurance’, POSCO INTERNATIONAL has paved the way for its subsidiaries to secure funding at lower interest rates, improve financial ratios, and reduce their overall debt burden. The ability to access liquidity quickly allows POSCO’s international operations to continue trading without disruption, even if payments are delayed from clients. This added flexibility in managing cash flow and debt will contribute to greater operational efficiency and financial health.
CEO Lee Kye-In of POSCO INTERNATIONAL emphasized the positive impact on the company’s competitiveness, stating, “Through this collaboration, our local subsidiaries will be able to secure operating funds at lower interest rates and improve financial ratios, which is expected to further enhance our business competitiveness.” This new model not only boosts POSCO INTERNATIONAL’s financial standing but also serves as a valuable tool for global trade expansion.
The Role of Korea Trade Insurance Corporation and Deutsche Bank
The Korea Trade Insurance Corporation (K-SURE), a key player in export credit insurance, plays an instrumental role in facilitating the ‘Global Sales Insurance’. President Jang Young-Jin of K-SURE highlighted the importance of this partnership in supporting domestic companies navigating global financial challenges, saying, “We will continue to actively support domestic companies in securing funding under more favorable conditions in the global financial environment.”
On the banking side, Deutsche Bank acts as the financial partner in purchasing trade receivables, offering quick liquidity to POSCO INTERNATIONAL’s subsidiaries. This partnership is seen as a successful model in supporting trade finance, enabling companies like POSCO to meet their funding needs in a timely and efficient manner.
A Model for Future Global Trade Finance
The ‘Global Sales Insurance’ represents an innovative shift in the way companies approach trade finance, particularly in international markets. With this new product, POSCO INTERNATIONAL is not only securing financial stability for its global subsidiaries but also setting an example for other domestic companies to strengthen their financial competitiveness and global trade operations.
The success of POSCO INTERNATIONAL in securing this first-of-its-kind insurance is a crucial step in the evolution of global trade finance. By leveraging this technology, more domestic companies are expected to follow suit, enhancing their ability to expand overseas, manage liquidity, and reduce financial risks.
Key Takeaways:
• POSCO INTERNATIONAL is the first South Korean company to receive ‘Global Sales Insurance’ security, enhancing its global trade finance capabilities.
• The Global Sales Insurance allows POSCO’s subsidiaries to sell trade receivables under non-recourse conditions, improving liquidity and financial stability.
• Deutsche Bank facilitates quick liquidity by purchasing the trade accounts receivable, reducing POSCO INTERNATIONAL’s debt burden.
• The Korea Trade Insurance Corporation provides the insurance security, ensuring stable funding for POSCO’s overseas operations.
• This innovative financial product helps POSCO INTERNATIONAL secure operating funds at lower interest rates and improve financial ratios.
• Global Sales Insurance offers a sale of receivables rather than a loan, reducing corporate debt and allowing for better financial flexibility.
• POSCO INTERNATIONAL’s move sets a new model for domestic companies seeking to strengthen their financial competitiveness in global markets.
• K-SURE and Deutsche Bank’s collaboration demonstrates the importance of financial cooperation in supporting international trade.
