The failure of Brazilian retail giant Americanas has once again thrown the spotlight on a lack of transparency around the use of supplier finance by large corporations. 

The retailer, which has 1,800 stores across Brazil, went into bankruptcy protection on 19th January after incoming CEO Sergio Rial revealed that he and his team had found 20bn BRL (4bn USD) in previously unreported debt. Rial resigned shortly after.

The newly-disclosed borrowing had previously been obscured within a supplier finance programme under which Americanas engaged with suppliers on 90-day terms and multiple banks offered early payment to those suppliers.  Following the revelations, Americanas said that its current cash position stood at only 800m BRL, down from a previously reported 7.8 bn BRL. 

​As Bloomberg Law reports, Americanas' financial reporting was covered by the accounting standards issued by the International Accounting Standards Board (IASB) which, unlike FASB, has yet to make the reporting of supplier finance mandatory. IASB has postponed a decision on when to take that step until its next meeting.

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The Working Capital Forum is hosting a webinar on SCF reporting standards on 16th February.

​Supply chain finance provider Twinco Capital has raised $12 million in new funding, raising the prospect of rapid expansion in its core fashion and retail markets.

Sandra Nolasco, CEO, and Carmen Marín, COO (above), founded the company in 2016, and it benefitted from a $3m funding round in   2021. So far it has onboarded more than 100 suppliers in 12 different countries for buyers in Europe and Latin America.

It offers up to 60% or order value at the purchase order stage, especially valuable to smaller suppliers in countries such as Bangladesh, and bases its lending decisions on detailed analysis of the supplier's record with the buyer -including non-financial metrics such as ESG performance.

Working capital finance provider LSQ is to use Calculum's Ada platform to help clients compare their payment terms with their peers, negotiate better payment terms and identify areas for working capital optimisation.

The agreement gives Calculum, founded in 2020 by former Marco Polo Network executive Oliver Belin (right), access to LSQ's substantial client base, built up over 25 years.

Pedro Rojas, VP of Global Sales at Calculum, described the partnership as, 'A vital step in providing tools for companies to maximize efficiency, maximize working capital and succeed in today's complex, technology-driven supply chains.'

​'Calculum brings the data insights via AI analytics and LSQ the execution platform and liquidity options,' he added.
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Supply Chain Finance platform Traxpay has become the first provider to start live tests of transferable digital finance instruments, which will be legalised by the UK government’s upcoming Electronic Trade Documents Bill.
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The electronic trade documents will be managed through the TradeSecure service from quantum computing specialist  Arqit, which uses distributed ledger technology to provide customers with referenceable digital finance instruments in the form of a Digital Promissory Note or Digital Bill of Exchange.

Arqit says its provision of both a provable digital original and a unique identifying stamp means the TradeSecure digital finance instruments cannot be tampered with, creating a safe legal promise to pay for goods or services which all supply chain parties can use to conduct trade. 

Markus Wohlgeschaffen (pictured), Traxpay’s MD of markets and sales, described Arqit's technology as, 'Highly compatible with our supply chain finance ecosystem and uniquely capable of delivering clearly identifiable, quantum-safe digital finance instruments which are urgently needed in the digital trade era.'

Citi has joined forces with fintech Stenn to cover the 'last mile' of supply chain finance provision to the very smallest firms in corporate supply chains. 

European discount store operator Pepco is looking to use supply chain finance to support its expansion plans, says Alan Chitty, director of group treasury, tax and risk at the company at the Working Capital Forum Europe on 1st December.

The company is opening at least 550 new stores next year, adding to the existing 3000 shops across Europe, according to an announcement in October.  ​

New regulations requiring greater disclosure of supply chain finance programmes are “unquestionably a good thing,” says Thomas Dunn, chairman at Orbian and panellist at the Working Capital Forum Europe in Amsterdam.

Both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have put together new and much-anticipated regulations in the past few months to help investors and rating agencies better understand why companies are using SCF programmes.

Dunn said the rules reflect a wider trend towards greater corporate disclosure, such as corporates potentially being asked to provide more detailed data on compensation packages or scope 3 carbon emissions.

“It will be more level playing field for disclosure and this level of transparency is beneficial for the market,” added Frederic Gits, group credit officer, corporates at rating agency Fitch Ratings.

Sean Edwards, CEO of the industry body International Trade and Forfaiting Association (ITFA) reflected that “more competent providers of SCF will be at a premium with the amount of reporting and data that will be required by corporates.”

The industry has perhaps taken a collective sigh of relief that the disclosure regulations are so far not calling for the reclassification of debt – which would potentially make SCF programmes less appealing to set up.

However, what the regulations will do, Edwards says, is “put the ball in the ratings agencies’ court” in that they will now have much clearer information to make their own decisions on whether a SCF programme should be considered debt or not.

“Now agencies will be able to look at a programme’s characteristics. Are there any unusual factors? Are DPOs over industry norms,” he explained.

While increased regulation of the SCF market has been in the pipeline for a long time, panellists agreed that their introduction will only help improve transparency in a market that had been threatened by scandal in recent years.

The collapse of supply chain finance firm Greensill Capital last March did have the potential to upset the market. However, panellists agreed that SCF market had swiftly recovered.

“It was a ripple and the waters closed over it extremely quickly,” said Dunn, praising the efforts of some banks and tech firms to “minimise the chaos” around the collapse.

However, panellist Duncan Mavin - the author of The Pyramid of Lies – Lex Greensill and the Billion-Dollar Scandal – warned that future scandal is always a possibility.

“There are still ‘Greensill Capitals’ everywhere - cropping up”.

Mavin’s book was published this year and charts the rise and fall of the company’s founder Lex Greensill.

His investigations into Greensill revealed that while the company was involved in some straightforward legitimate trade or supply chain finance, it had other business that fell out of the scope of SCF.

“The sources I developed said we want you to write about this so supply chain finance isn’t tarred with same brush as Lex,” he explained.

“Some really smart sources on Greensill said they didn’t invest – it was just too complicated – 200 pages of documents for couple of basis points,” he said.
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He called on delegates and the wider investment community to remain alert to new and potentially questionable business propositions.
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To read more about regulation and Duncan Mavin’s investigations into Greensill Capital – click here. 

​Focusing on simplicity is key when setting up an in-house supply chain finance (SCF) programme, said Kenneth Kernen, principal business controller for sourcing at Swedish telecoms firm Telia, speaking at the Working Capital Forum Europe in Amsterdam on 1st December.

Kernen chose to create a SCF system entirely built in-house by using its ERP system and without turning to a fintech or bank to take charge.

“[We needed] a highly automated solution where simplicity is preferred,” he said, speaking at the Working Capital Forum Europe in Amsterdam on 1st December.

While Kernan says he may consider adding other tools to the programme, he sees too much choice as unproductive.  

“Adding too many options, nothing gets done. We believe less is more,” he adds.

The programme has all its functionality built into Telia’s existing SAP solution which is fully integrated into Telia’s "normal way of working", explains Kernen.

This contrasts with working with a third-party provider that needs to be integrated and create new ways of working, he adds. 

The programme has grown substantially since its launch. In 2015 the SCF share of the company’s total accounts payables stood at 1 percent. By 2021 it reached 63 percent of total accounts payables.

Kernan wrapped up his presentation with advice to companies looking to replicate his achievements, saying you don’t need to look for inspiration from the ‘best’ supply chain finance programmes but “think about the best fit for you”.