Suppliers to Dubai's Landmark Group get access to cheaper financing

A new $ 200 million supply chain finance deal agreed last month between Dubai-based retail conglomerate Landmark Group and the Asian Development Bank (ADB) will provide its network of suppliers in countries like Bangladesh, China, India, Sri Lanka and Vietnam with access to cheaper sources of capital, according to the group’s chief financial officer Rajesh Garg.

The deal is the first of its kind and will allow major retailers like Landmark the chance “to impact the cash flows of suppliers across emerging markets in a positive way,” a spokesman for Deutsche Bank, which arranged the deal, said in a statement publicising the transaction last month.

In an email sent to Zawya earlier this month, Garg said that the deal “will enable SME (small and medium-sized enterprise) suppliers to gain better access to low-cost working capital and should therefore contribute to SME growth, enhancing their ability to create jobs in their home market”.

Garg said that it had been in talks with Deutsche Bank and the ADB for nine months before announcing the agreement, which, he said, “helps us diversify institutional relationships and tap (the) AAA rating of the ADB”.

He added that the deal would “initially benefit our existing suppliers, but will also be applicable to prospective new suppliers”.

About 50 suppliers are initially expected to be eligible for the supply chain funding (SCF) as part of the deal.

Landmark Group has more than 2,200 stores across the Middle East, India and Africa, which are a mix of its own branded outlets and franchise stores. The company employs over 55,000 staff in stores such as its Babyshop and Centrepoint clothing stores, Home Centre homeware brand and eMax electronics retail arm, among others.

ADB is a Philippines-based development finance body owned by 67 member countries that is aimed at reducing poverty in the region. Last year, it provided $ 31.7 billion in development finance, according to a press release announcing the Landmark Group funding deal last month.

Harold Leenen, Deutsche Bank’s Middle East and Africa’s head of transaction banking, explained in a separate statement emailed to Zawya last week that Landmark Group currently procures the bulk of its stock from emerging Asian markets.

“When we reviewed their underlying trade flows, it became immediately evident that the ADB could play an important role to work with us in facilitating this unique SCF structure in these markets,” Leenen said.

He said that Deutsche Bank had developed a master agreement with ADB that would allow it to target similar transactions.

“We hope similar opportunities could be explored in line with the ADB’s purpose and our own goal to have a positive impact on our customers and the communities within which we work,” Leenen said.

(Reporting by Michael Fahy; Editing by Shane McGinley)

(michael.fahy@thomsonreuters.com)

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