Funding critical equipment
When COVID-19 hit, hospitals across the world found themselves in need of financing for mission-critical medical devices and equipment like ventilators, X-ray machines, and ICU equipment. This was even more the case in many Latin American countries like Bolivia, Colombia, Mexico, Costa Rica, and Honduras, which often lack local sources of financing and are often avoided by outside financiers due to the perceived “emerging market risk.” Despite these circumstances, Arena saw what was possible, and we took the opportunity to join a regional joint venture partner in a worthwhile cause, providing essential healthcare equipment at a crucial time.
Arena was introduced to this opportunity through the company’s CEO, with whom we’d had a previous trade finance joint venture. That partnership had been strong, so when he later joined this company, he reached out to us to set up a similar facility.
In this case, across a series of transactions, Arena and our joint venture partner were able to look underneath the optics of the country risk and structure a series of factoring facilities in which financing for the wholesale purchase of healthcare equipment was guaranteed by layers of downside protection. This protection included cross collateralization of the transaction among a series of deals with the same joint venture partner, the underlying equipment, a corporate guarantee from the purchaser (with a 10-plus-year track record of buying equipment from blue-chip manufacturers), personal guarantees from the company’s principals, and credit insurance from a major European underwriter that was not subject to any local country risk. Further, as is generally the case with Arena’s transactions, the facility was hedged to US dollars to eliminate foreign exchange exposure.
As banks have continued to retreat from the trade finance sector (particularly at the smaller sizes Arena is often willing to facilitate), Arena can help make such important purchases happen while still controlling risk. In total, Arena formed a $10 million facility with our joint venture partner that quickly resulted in transactions that supplied equipment to hospitals in 10 different areas across Central and South America.
It is investments like these that remind us of an important reason we do what we do—to support organizations that are providing goods and services to move the world forward in countless ways. A company doesn’t have to be in such a life-critical sector as healthcare to come to Arena for financing, but we’re especially proud to provide financing to companies like these that otherwise might not be able to facilitate services where they are needed most.