SunTrust Bank Foreign Exchange & Global Trade Solutions ... - Raffa

SunTrust Bank Foreign Exchange & Global Trade Solutions
International Expansion
June 14, 2012

Euro Declines as Odds of a Greek Exit Increase
Politics
Market Reaction
On the Horizon
Greece
Greece's political leaders have so far failed to form a
coalition government, increasing the odds of another
election in mid-June. This has reignited concerns
over Greece’s ability to satisfy the terms of its two
bailouts that have already been negotiated. A Greek
exit from the Euro will likely put pressure on Portugal
and Spain’s bond markets.
France
Socialist Francois Hollande’s defeat of Nicolas
Sarkozy in the presidential runoff last month signaled
a shift to the left in France. However, the relative
stability of the French bond markets suggests the
president-elect’s cabinet picks could be marketfriendly
Germany
German Chancellor Merkel gave up little ground in
Germany’s demands for austerity despite the worst
election result her party had in more than half a
century. Growth vs. austerity debate will likely
intensify in the coming weeks.
• Risk sold off broadly across currency markets
with funds flowing into the U.S. Dollar and
Japanese Yen.
• Market perception of a Greek exit has risen
sharply. According to a recent Bloomberg poll,
57% of investors predict an exit by year-end.
• The Dollar Index (DXY) has rise over 5% since
the French election, breaking key resistance at 80
as investors sought safety following the European
election results.
• Commodities weakened in light of the USD
strength with WTI falling nearly 21% since the
beginning of May.
• World equity indices traded lower with the S&P
500, Nikkei 225, and DAX indexes are all in
negative territory for 2012.
• The US 10-year note yield fell to a record low of
1.45% on as investors sought the perceived
safety of US treasuries. Conversely, interest rate
swaps rose as credit spreads widened across
assets.
• The European Commission said that the Euro
region will contract 0.3% this year, the first
contraction since 2009. With the economic slump
deepening in the Euro zone, unemployment at
the highest level in 15 years, and a slowing U.S.
economy, prospects for a third round of bond
purchases by the Federal Reserve, known as
QE3, have increased recently.
• There is speculation Spain may be given more
leeway to meet its budget deficit target next year.
If so, there may be pressure for other countries
to follow including France, which would have to
pass large cuts to achieve its current deficit
target.
• European Central Bank (ECB) President Mario
Draghi has been reluctant to lower the interest
rate below the record low of 1%. At the last
meeting on June 6 th , the ECB left the benchmark
rate unchanged at 1%. However, Draghi said
that the monetary union is “unsustainable” in its
current form, keeping the door open for the ECB
to withhold further stimulus until governments do
more to deal with the causes of the crisis.
For Consideration
How does the changing value of the U.S. dollar affect your future revenues and margins
How does your budget rate compare to current market levels
Have you hedged your net currency exposure to protect cash flows, income statement or balance sheet items
Are you examining foreign acquisitions or asset divestitures
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Source: Bloomberg

Euro-zone Charts Are Starting to Break Down
EURUSD Spot Rate
• After breaking below the head & shoulders pattern in May, EUR has declined sharply below the previous low for 2012 at 1.2625. This week, it
reversed after making a low of 1.2288. This level approximates 150% (Fibonacci extension percentage) of the move from 1.4940 to 1.3146 (May-
Sept. 2011). On the upside, the immediate resistance is at the1.2600 area. On the downside, minor support at 1.2150 will be followed by major
support at 1.1875. This level marks the low reached in June of 2010.
10-YR Spanish Govt. Bond Price
10-YR Spanish Bond -10-YR German Bund Yield Spread
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Source: Bloomberg

Foreign Exchange Solutions
Outright Forward
ISSUE: Client needs to protect the USD cost of
a Foreign Currency-denominated equipment
purchase, with payment to be made in one
year’s time.
SOLUTION: The Outright Forward provides the
client a guaranteed rate of exchange for a
specified delivery date one year from now.
Swap
ISSUE: Client needs to fund an inter-company
Foreign Currency Loan with USD and wants to
protect the repayment value in one year’s time.
SOLUTION: A FX Swap simultaneously locks
in both the sale and purchase of foreign
currency to neutralize exposure to future rate
fluctuations.
Client Limit Orders
ISSUE: Client wants to monitor exchange rates
and enter into a transaction if the currency
moves to a favorable level.
SOLUTION: Client places a limit order with
SunTrust which is executed if the pre-specified
rate trades at any time, 24 hours a day.
Window Forward
ISSUE: Client makes product purchases in
Foreign Currency on an incremental basis with
flexible payment terms.
SOLUTION: The Window Forward provides a
guaranteed exchange rate while allowing
variable delivery dates within a range of time.
Call Option
ISSUE: Client wants to protect the USD cost of
a Foreign Currency acquisition but also retain
upside market potential.
SOLUTION: The Call Option protects against
negative market impact but allows the client to
take advantage of favorable market movement.
Time Deposit
ISSUE: Client looking for a short-term
investment of Foreign Currency cash balances
for later use.
SOLUTION: The Time Deposit allows a client
to deposit currency balances earning the
interest rate of the currency deposited.
(Minimum $25K/7-day tenor)
Incoming Foreign Funds
ISSUE: Client wants to bill and receive foreign
currency payments via wire and control the
exchange to USD.
SOLUTION: Customer wires foreign funds to
SunTrust’s currency accounts for their credit
upon immediate conversion into USD.
Foreign Check Conversions
ISSUE: Client wants to bill and receive
payments by way of foreign denominated
checks or drafts but ultimately needs USD.
SOLUTION: Client is set up for Global Check
Clearing to receive a preferred rate of
exchange on conversion and immediate use of
USD funds.
Online Trading
ISSUE: Client wants an alternative solution to
manual (phoned in) foreign currency wire
requests.
SOLUTION: Client is set up on SunTrust
Online Foreign Exchange to execute currency
transactions with real time rates via the web.
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Global Trade Solutions
Export Letter of Credit
ISSUE: The Seller (Beneficiary) needs a
secure way to get paid when selling products or
services to a foreign buyer.
SOLUTION: The Export LC provides the Seller
a promise of payment from the issuing bank
provided they comply with the terms of the
letter of credit. The Export LC also serves as
payment mechanism for the trade transaction.
Export Documentary Collection
ISSUE: The Seller is exporting to foreign clients
where they have a certain level of confidence
but are not ready to offer open account terms
and/or do not want to incur the costs of an LC.
SOLUTION: The Export Documentary
Collection provides a degree of protection while
reducing handling costs associated with letters
of credit.
SBA Export Express Loan
ISSUE: Small business client exports and
wants financing for export inventory, A/R and
export development activities.
SOLUTION: Provides export working capital
line of credit up to $500,000. Borrower must
meet U.S. Small Business Administration
eligibility requirements.
Import Letter of Credit
ISSUE: The Buyer (Applicant) is concerned
about the risk of paying cash in advance for a
product or service to a foreign supplier and
cannot negotiate open account terms.
SOLUTION: The Import LC provides a
measure of security to both parties; the supplier
must comply with the terms of the LC before
the bank will pay. Buyer must apply and qualify
for bank credit.
Import Documentary Collection
ISSUE: The Buyer imports products from
foreign suppliers that are not willing to give
open terms but will accept Documentary
Collections instead of LC’s.
SOLUTION: The Import Doc Collection
provides security because the banks handle the
documents in exchange for payment & does not
requires credit lines as with LC’s.
SBA Export Working Capital Loan
ISSUE: Client exports and wants financing for
export inventory, A/R and export development
activities for more than $500,000.
SOLUTION: Provides export working capital
line of credit up to $5,000,000. Borrower must
meet U.S. Small Business Administration
eligibility requirements.
Standby Letter of Credit
ISSUE: Client (Applicant) needs to provide
assurance of financial or other performance
obligation to a foreign or domestic business
counter party
SOLUTION: The Standby Letter of Credit
protects the Beneficiary in the event of
Applicant’s default with the financial backing of
the issuing bank. The Applicant must apply
and qualify for bank credit.
Online Trade Services (OTS)
ISSUE: Clients (Importers & Exporters) want an
automated, online system for handling letter of
credit and documentary transactions with the
bank.
SOLUTION: OTS allows clients to
electronically process (transmit & receive)
instructions for the issuance and payment of
letters of credit and documentary collections.
Export-Import Bank (Ex-Im Bank) Loan
ISSUE: Client exports and wants financing for
export inventory, A/R and export development
activities for more than $1,000,000.
SOLUTION: Provides export working capital
line of credit . Must meet Ex-Im Bank’s
financial criteria. US products or services
only; restrictions on military products
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Global Trade Solutions
When should a Non-Profit or Company use a Letter of Credit
Standby Letter of Credit
ISSUE: Non-Profit or Company (Applicant) needs to
provide assurance of financial or other performance
obligation to a foreign or domestic business counter party
(Beneficiary)
SOLUTION: The Standby Letter of Credit protects the
Beneficiary in the event of Applicant’s default with the
financial backing of the issuing bank (SunTrust.) The
Applicant must apply and qualify for bank credit.
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Global Trade Solutions – Standby Letter of Credit
Issue: Non-Profit or Company (Contractor/Applicant) is preparing a proposal for NATO
(Purchaser/Beneficiary) and the Purchaser/Beneficiary requires a certain type of letter of credit to guarantee
the Contractor’s performance.
PERFORMANCE GUARANTEE
As a guarantee of performance under the Contract, the Contractor shall deposit with the
Purchaser/Beneficiary within thirty (30) calendar days from the Effective Date of Contract a bank guarantee
(the “Performance Guarantee”) to the value of ten per cent (10%) of the total contract price.
SOLUTION: The Standby Letter of Credit protects the Purchaser/Beneficiary in the event of
Contractor/Applicant’s default, with the financial backing of the issuing bank (SunTrust.) The
Contractor/Applicant must apply and qualify for bank credit.
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Global Trade Solutions – Standby Letter of Credit
Process:
SunTrust Non-Profit Client (Contractor/Applicant) provides following information to SunTrust:
- Details/copy of Contract
- Completed and signed SunTrust Standby Letter of Credit Application and Agreement
- If a line of credit already established*, credit approval sought by SunTrust Relationship Manager (RM)
- RM and Client consult with SunTrust Global Trade Solutions (GTS) to go over beneficiary language and application
SunTrust International Operations:
-RM sends application and beneficiary language to SunTrust International Operations for standby LC issuance.
-Turnaround time within 48 hours from receipt of complete standby LC application and agreement and beneficiary
language.
- Operations issues electronic draft or final based on client and beneficiary request (draft can be emailed.) Final must be
sent via SWIFT to beneficiary’s bank as designated on application.
Solution: The Standby Letter of Credit protects the Purchaser/Beneficiary in the event of Contractor/Applicant’s default
or non-performance, with the financial backing of the issuing bank (SunTrust.)
* If line of credit not in place, RM will obtain information to underwrite and seek credit approval. The line of
credit can be used to serve as collateral for issuance of the standby letter of credit. Cash in DDA is other
option.
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Global Trade Solutions
Tools for an association to use to get paid on international commerce
Export Letter of Credit
ISSUE: Non-Profit (Seller/Beneficiary), whose mission is to
provide humanitarian assistance, is negotiating a sale of
3,800 metric tons of rice to a Buyer in Liberia. The sale
would be made based on an “at-sight” irrevocable letter of
credit to be confirmed by Sun Trust.
SOLUTION: The Export Letter of Credit protects the
Seller/Beneficiary in the event of Buyer’s (Applicant)
and/or the Issuing Bank’s default. The Buyer (Applicant)
must apply and qualify for bank credit at its bank in order
for the Letter of Credit to be issued and sent to SunTrust
for the benefit of the Non-Profit Client of SunTrust.
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Global Trade Solutions – Export Letter of Credit
Process:
SunTrust Non-Profit Client (applicant) provides following information to SunTrust:
- Transaction Details: Product, $ Amount, Shipment Date(s), Payment Terms, Issuing (Foreign) Bank Name & Country;
Expiry Date
- SunTrust GTS provides Letter of Credit Guide with instructions to Non-Profit Client to send to Buyer on how to have its
bank issue the Letter of Credit to SunTrust
- There is no credit approval required for the SunTrust Non-Profit Client since it is the Beneficiary (or recipient)
of the Letter of Credit being issued by its Buyer.
- SunTrust Client and SunTrust GTS will go over draft of the Letter of Credit when received by SunTrust
What Happens Next:
-SunTrust International Operations verifies the authenticity of LC and passes this LC on to the beneficiary(the
seller/exporter)
-The beneficiary reviews the LC to determine whether LC is acceptable to them.
-The beneficiary ship the goods to the applicant once LC is accepted by the beneficiary
-The beneficiary procures all the documents required in LC and presents them to SunTrust to collect payment.
-SunTrust Bank will examine the document to determine if all documents in compliance with LC terms.
-SunTrust will forward documents to the issuing bank to collect payment.
-The issuing bank will release fund to SunTrust if they determine all terms of LC have been complied with. OR, If the
documents are found with discrepancy(ies), the issuing bank will contact the applicant for waiver of discrepancy(ies).
-If the Waiver from applicant is obtained by the issuing bank, they will wire the proceed to SunTrust.
-Once SunTrust receives fund, we will credit or wire the fund to the beneficiary’s account.
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Your SunTrust FX & GTS Team
Craig Jackson
VP
Currency Risk Management
Contact Information
3333 Peachtree Rd. NE
11th Floor
Atlanta, GA 30326
1-877-726-9733
1-404-926-5790
Craig.Jackson@SunTrust.com
Michael Filchock
Director
Global Trade Solutions
Contact Information
8330 Boone Blvd.
7th Floor
Vienna, VA 22182
703-442-1516
Michael.Filchock@SunTrust.com
Steve Goeke
Associate
Currency Risk Management
Contact Information
3333 Peachtree Road NE
11th Floor
Atlanta, GA 30326
800-494-9782
Steve.Goeke@SunTrust.com
Hai-nah Ellison
Vice President, Trade Advisor
Global Trade Solutions
Contact Information
919 E. Main St.
2nd Floor
Richmond, VA 23219
804-782-7476
Hai-nah.Ellison@SunTrust.com
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Important Disclosures
This presentation is for informational purposes only. By accepting this information, the recipient agrees that it will use the
information only to evaluate its potential interest in the strategies described herein.
This document is not a research report under rules and regulations and is not a product of any SunTrust Robinson Humphrey
(“STRH”) research department. The information contained in this material has been prepared by the Foreign Exchange Desk of
STRH who supports underwriting, sales, lending and trading activities of STRH. The information contained herein is based on
sources which SunTrust Robinson Humphrey believes to be reliable but we do not represent that it is accurate or complete. All
prices, yields and opinions are subject to change due to market forces and other conditions. This communication is not to be
considered as a recommendation of any proposed transaction or provide any other product or service.
Conflict Disclosure
The person distributing this material may have already provided any strategy or idea to STRH trading desks, which may have
already acted on the strategy or idea. STRH may seek to do business with the companies mentioned in this material and may
have either a long or short position in the securities or products mentioned in this material. Employees of the trading, sales and
capital markets desks are compensated based on the profitability of STRH’s trading, sales and underwriting activities as well as
the Debt Capital Markets division’s overall profitability. This material may be inconsistent, and reach different conclusions, with
other STRH desk material or research reports. STRH is under no obligation to bring them to the attention of recipients of this
information.
SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and
its subsidiaries, including SunTrust Bank.
Foreign Exchange, risk management products and services and agency services including derivatives products are offered by
SunTrust Bank.
©2012 SunTrust Banks, Inc. SunTrust Robinson Humphrey is a federally registered service mark of SunTrust Banks, Inc.
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