- Country: USA
- Industry: Wholesales Trade
- Stage: Initial growth (first revenues)
- Years in operations: 2, Employees: 3
- Investment size: $6,625,000 / min. $6,625,000
- ROI: 68% in 1 years
- Type of investment: Debt, Equity
Our company seeks a JV partner willing to provide a financial guarantee of $6.625 million to enable a containerized sugar operation to commence in South America.
Our company is a direct mandate of the sugar supplier/owner. Virtually all sugar sold from Brazil requires a one month guarantee and rolling monthly payments to pay for the sugar. ROI of 68% ($4.5 million) will be paid for use of the guarantee, which will be returned in full and unused at the end of 14 months.
We have arranged with freight forwarders in the free zone of Montevideo, Uruguay, to unload 12,500 MT per month of our Brazilian sugar into a warehouse, and re-package it for us into 20' containers and reship them where directed. Because both Brazil and Uruguay belong to the MERCOSUR, some tax facilities are added to those already provided by Montevideo, a city with complete and modern banking facilities for international traders.
During the last 18 months, we have had requests for tens of thousands of tons of containerized sugar from smaller end buyers wanting 100 to 5,000 MT monthly. Large sugar suppliers choose not to supply buyers wanting less than minimum 12,500 MT bulk shipload amounts.
In order to offer the smaller end buyers of containerized sugar a contract, we must first sign a one-year contract with the supplier.
In order to sign the contract with the supplier, we must provide them with a one-month shipment value guarantee.
The guarantee we seek from a JV partner is valued at our cost of the sugar/freight forwarding of US$ 530.00 MT, or US$ 6.625 million for an initial amount of 12,500 MT per month in a one-year contract.
With the supply contract in hand, we can then offer mirror image contracts to the smaller end buyers of the sugar, which bundled will total the 12,500 MT amount available.
The end buyers' contract will require the end buyer to provide an MT-103/23 payment instrument in advance of any sugar shipment. This is simply a wire transfer of the buyers´ funds to our bank with conditions for payment release, stipulated in their contract, which requires the presentation of the appropriate shipping documents normal for any commodity sale.
Because the buyers' payments will have always been received in our bank before a ship is ever loaded, there is zero risk that the JV Partner’s "guarantee" will ever be called.
The guarantee we are seeking from a JV partner will entitle that partner to a obtain a share of the profits at the rate of US$ 30.00 per metric ton: that´s US$ 375,000 per each month of the contract, or US$ 4,500,000 per year, a profit of 68% over one year for the value of the SBLC/BG. Payment of profit share shall be made monthly after all containers for that month have been shipped.
The guarantee (fully funded, non-divisible/non-transferable) can be in the form of a Bank Guarantee (BG - from non-U.S. banks), or Standby Letter of Credit (SBLC). Again, with the end buyer's money already in the supplier's bank prior to shipping sugar, and with the sugar insured for 110% of the buyer's purchase price value throughout the entire shipping/repackaging/re-shipping process, the JV partner's "guarantee" payment instrument is never at risk. The duration of the guarantee instrument needs to be for 14 months, allowing for 30-45 days for first shipment, and 1-2 weeks to collect payment for last shipment of the 12 monthly shipments. Following receipt of payment for the last contract shipment, the JV partner’s guarantee instrument is returned in full.
The JV partner can participate for one year, or opt in for up to 2 additional years (3 year total), if he simply wants to roll over the guarantee for the next 12-month operation for up to 3 years participation.
Interested investors can establish contact with us on Merar.
Currently, there is no existing competitive operation as described here. Freight forwarding of containers in Brazil is subject to a 30% export tax, which is not incurred if the sugar is shipped CIF out of Brazil, as we intend.
Rationale for the deal
Each month we receive requests from agents we use in several countries from numerous smaller end buyers seeking containerized sugar in amounts less than a minimum shipload (12,500 MT). No one company is currently specializing in taking care of the smaller end buyers of sugar.
Our company is comprised of five companies already established in 4 countries that provide the corporate framework in these countries necessary to operate this operation immediately. We are partnered with a long established freight forwarder and a sugar owner. We anticipate that this operation can expand to 100,000 MT per month during the course of one year.
Use of financing
The financing required is in the form of a guarantee. We do not seek a cash investment of any type. The actual funds backing the guarantee will always remain in the JV partner's bank account. The guarantee provided will not be called because the smaller end buyer will have already provided a cash payment instrument in advance of any sugar being shipped to them. No payment, no sugar.
The total of the end buyers' payment instruments will ALWAYS surpass the value of the JV partner's guarantee value PRIOR to any sugar being shipped to the end buyers. By contract, the guarantee cannot be used unless the buyer's payment is defaulted. Because we require the buyer's payment in advance and approved in advance by our bank (Santander, Montevideo, Uruguay), it is impossible for the buyer to default on the payment. Following receipt of the last payment from end buyers in the 12th month of shipments, the guarantee is returned IN FULL unused to the issuer.
Opportunity for the investor
By utilizing a guarantee instead of a cash investment, the JV partner can earn a return of $4.5 million, paid out over the course of 12 months worth of shipments. Please note that the first shipment will take approximately 45 to 60 days from receipt of the guarantee to occur. This is due to the normal process of arranging the shipment of the sugar from the mills to dockside warehousing (12,500 MT requires loading 500 trucks), and arranging with the shipping line for a cleaned 12,500 MT vessel to arrive at the loading docks in Santos, Brazil.
There are typically anywhere from 75 to 130 vessels queued up in the harbor area waiting for their turn at loading. Following loading, the ship needs 4-5 days to transit to Uruguay, then unload into warehousing, then begin the reloading operation. This is the reason the guarantee must be available for 14 months instead of 12. Still, with no cash infusion required, the return of $4.5 million should be incentive for participation, in addition to the return of the unused guarantee at the end of the operation.
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