In-Bankruptcy Put Options
One of your company’s most important customers has filed for bankruptcy protection. It is vital for your company to be able to keep selling product to this customer in order to realize your company’s revenue projections.
Furthermore, your bank is concerned that maintaining the current line of credit and terms with your bankrupt customer is too risky. In fact, your bank will no longer include your customer’s accounts receivable as loan collateral.
ETG’s In-Bankruptcy Put Option enables a supplier to continue selling and shipping to distressed companies who are in the process of restructuring while in bankruptcy. You make the call to buy ETG’s In-Bankruptcy Put Option to safeguard your receivables for a period of time, e.g. 6 months.
In the event of your customer’s liquidation, and failure to pay claims for the receivables accrued during the bankruptcy, ETG will cover 100% of your receivables accrued during the bankruptcy.
With respect to the substance of Put Options, many credit professionals are somewhat versed in more common alternative forms of credit-risk mitigation, such as Factoring and Trade Insurance. However, once a Customer has filed for bankruptcy protection, factoring and insurance, are rarely, if ever, offered.