Products | Capital Markets

Merchant West’s Capital Markets division operates across multiple asset classes to help provide individuals and companies with access to enhanced cash management, risk management and liquidity. Our highly experienced traders specialise in providing you with holistic solutions which include the hedging of currency risk, interest rate risk and commodities, all while enabling you to focus on your core business.

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Bridging Financing

What It Is:

This solution offers your business short-term funding in a cost-effective manner where liquidity is required in the fastest possible time. This allows for some ‘breathing room’ while you secure long-term finance or realise the sale of your assets. This solution also functions as a cash-flow backend lend.

Risks Attached:

  • Re-active Price and Forex Volatility management can lead to financial risks and potential margin losses.
  • Ineffective management of the cost of debt assigned to funding commodities and/or debtors will result in deterioration in overall gross profit margins and increased cost of capital.
  • Cash flow mismanagement can lead to impulsive short term debt raising at excessive debt rates/costs.

Business Value Add

  • Enhanced cash flow management and liquidity.
  • Competitive product pricing.
  • Overall ease of doing business.
CFC Finance Option

What It Is:

This solution offers your business short-term funding against unconverted CFC FCY Balances at a point in time when FX volatility and conversion doesn’t merit the conversion, albeit that local creditors need to be settled. CFC Balances can further be value enhanced by way of hedging wrapper with the CFC Finance Option liquidity provider.

Risks Attached:

  • Converting FCY Balances at unprofitable FX rates yields increased costs and lower GP Margins.
  • Not settling local creditors due to the inability to convert FCY Balances given loss results in both reputation and credit standing deterioration.
  • Realised FX losses combined with loss of supplier discounts due to late settlement results in lower margins and negative cashflows.

Business Value Add

  • Enhanced cash flow management and liquidity.
  • Allows to settle local ZAR suppliers whilst managing and enhancing FX profits on CFC Balances.
  • Enhance tools to manage FX Risk at a fraction of the real FX Loss costs.
Treasury Outsourcing

What It Is:

This solution involves outsourcing an area of your business responsibilities as a means to reduce costs, improve efficiency and free up time to perform your value-add duties.

Risks Attached:

  • Incorrect Forex management can lead to losses in your business, as well as unnecessary costs.

Business Value Add

  • Managing the risks at the best rates available to your business minimises the risk, increases your returns, and enhances liquidity.
  • Gain an understanding of your unique business needs.
  • Improve your overall exchange rates.
  • Expert market advice and opinions combined with streamlined back office support.
Forward Exchange Contracts

What It Is:

Forward Exchange Contracts allow you to enter into an agreement with a bank to secure a fixed exchange rate for a specified amount of foreign currency, for a specific date in the future.

Risks Attached:

  • There is a risk that the market could strengthen or weaken, thereby forfeiting potential gains or losses.

Business Value Add

  • There is no initial margin call requirement, as we will fund this.
  • We will consume the credit risk on your behalf through the use of our DEC Facilities.
  • Managing risk exposure in uncertain times, therefore creating cash flow certainty.
Derivative Risk Participation

What It Is:

Derivative Risk Participation provides you with the opportunity to participate alongside Merchant West in Forex positions, with a view towards maximising potential gains and limiting potential losses. This solution constitutes a high risk, high return partnership with an aim towards profit sharing.

Risks Attached:

  • There is a risk that the market could move contrary to one’s expectations and open position.

Business Value Add

  • Risks are mitigated and quantifiable.
  • Achieving better Forex rates than the prevailing spot or forward rate at the point in time through technical analysis and expert opinion.
  • You, in conjunction with Merchant West, can make a more informed decision on the foreign exchange market.
Individual Offshore Allowances

What It Is:

Individual Offshore Allowances provide you with a mechanism to transfer your funds offshore in order to invest in various offshore portfolios. These include investments, property and bank accounts, handled as follows:

  • A single Discretionary Allowance of R1 million per calendar year; or
  • A Foreign Investment Allowance of R10 million per calendar year, which is applicable to private individual tax payers over the age of 18 years (a Tax Clearance Certificate from SARS, which is valid for 12 months, is required for this allowance).

Risks Attached:

  • The market may move contrary to one’s view or expectations.

Business Value Add

  • We facilitate the transaction on your behalf.
  • You do not need to open another bank account to transact with us.
  • We can achieve favourable exchange rates.
  • We can assist with the necessary administration and monitoring of your transfer.
Cash Management (Money Market Investments)

What It Is:

Through this Cash Management solution we offer you a cash management system that provides an efficient, easy to use and convenient way to manage your cash investments at highly competitive interest rates.

Risks Attached:

  • Funds are invested in Investment Grade (AAA.za) Instruments.

Business Value Add

  • Making your money work for you while it is not tied up in working capital or prolonged projects.
  • No transaction charges other than those related to cash deposits and other unconventional transactions.
  • Detailed monthly reporting.
  • Personalised services offered by our dedicated team.
Cash Management (Equity Accelerator)

What It Is:

This particular Cash Management solution allows you to invest the required deposit (as applied on asset finance transactions by most banks) at competitive rates via our Corporate Cash Management offering. In this way we provide you with access to the deposit mid-term into the duration of the asset finance transaction.

Risks Attached:

  • We consume 100% of your credit risk under the asset finance transaction.
  • Set-off is to be applied in the event of defaulting under the asset finance transaction.

Business Value Add

  • Create and enhance balance sheet substance for your business by way of capitalising the investment in the new asset as well as the investment in the deposit.
  • Create liquidity by way of reimbursement of the deposit invested mid-term into the duration of the asset finance transaction.
  • Overall enhanced cash and debt management by off-setting interest earned to interest expenditure of the debt, resulting in overall lower cost of funds and pricing of debt facilities.

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