From The Times Business Insight supplement, 7 November 2013
UK Export Finance and HSBC Bank worked together to help Vee Bee Filtration of Stourbridge secure contract bonds for a large oil and gas contract.
Vee Bee Filtration is a family-run industrial filtration company, based in Stourbridge in the West Midlands. The company has over 60 employees and more than 90 per cent of its business is overseas, mainly in the US, the Middle East and the Far East.
In 2012, Vee Bee won a £1.67million contract with a large US construction and engineering business to provide a bespoke filtration solution for a liquefied natural gas plant in Australia. The company’s filters would protect equipment worth millions of dollars from potentially harmful debris in the liquid gas. However, some of the financing needed to secure the contract was potentially problematic.
“Our turnover in 2012 was £6.4m,” says Nikki Reynolds, finance manager at Vee Bee, “so a single contract worth £1.67m is very significant. We already had a £1m bond facility with our bank, but the size of the bonds required for this new contract would have strained our finances too much for comfort.
“On top of this, we needed to buy the materials for the filters, as well as pay some of our subcomponent manufacturers, and this outlay would have prevented us from accepting other contracts that we were bidding for.”
Vee Bee already had a relationship with UKTI, who introduced them to UKEF. In October 2012, when the company’s existing bank was unable to increase the bond facility, an approach was made to HSBC – which was prepared to offer a £2m bond facility so long as UKEF shared half of the increased risk.
Vee Bee joined HSBC in December 2012 – and, with the help of UKEF, applied for bond funding in January 2013. HSBC agreed to issue two standby letters of credit, a preferred method of guarantee in North America. These letters of credit were in place in March 2013, so the
company could invoice their client for its upfront payment and buy the supplies needed to start work on the contract.
Thanks to this new contract and others in the pipeline, Vee Bee expects a turnover of £10m in 2013 and 2014, almost twice that of 2012.