Do you dare venturing out into the world? CEBRA architecture does
Architectural design firm CEBRA won a commission to design a cultural centre and adjacent park in the heart of Abu Dhabi. To take on the order, worth around DKK 70 million, CEBRA was required to provide the client with a supply bond that exceeded the amount of equity in this relatively small design studio. EKF helped CEBRA to overcome this challenge.
With a little help from EKF CEBRA took a chance
Aarhus-based CEBRA, a small architectural design firm with 40 employees, won a commission to design a cultural centre and adjacent park in the heart of Abu Dhabi. It was a dream assignment for CEBRA, who wanted to create a park inspired by the nature of the Emirates as well as convert an important building from the 1980s to a contemporary arts and cultural hub.
But to take on the order, which was worth around DKK 70 million, CEBRA was required to provide the client with a supply bond for 10 per cent of the contract amount. The large amount, literally higher than CEBRA's own equity, presented a challenge.
CEBRA therefore faced the classic situation in which a small enterprise gets a large order and has to make the two pieces fit together.
1 per cent of the risk amount is a small price to pay for peace of mind when seven million kroner is at stake
CEBRA's bank, Sydbank, was happy to offer the necessary credit and provide a bank guarantee to the client in Abu Dhabi, sharing the risk with EKF. But EKF also recommended that CEBRA and Sydbank insure their client bank guarantee with a Bond Guarantee.
The Bond Guarantee insures against unfair calling on the supply bond
A supply bond like the one CEBRA had to provide can be drawn upon at any time by the recipients of the bond Even in case of unfair calling, and they may not be right in claiming that you have not delivered as promised. If this happens and you are not insured, it can mean a substantial loss, and perhaps even bankruptcy, for the exporter.
CEBRA received a Bond Guarantee from EKF, which protected them against unwarranted calls on their supply bond. This meant they could sleep well at night, even if they had deposited around DKK 7 million in an “open” account.
“1 per cent of the risk amount is a small price to pay for peace of mind when seven million kroner is at stake,” says Kolja Nielsen, CEO at CEBRA.
Contract Guarantee secures ongoing receivables
EKF also provided a Contract Guarantee of DKK three million, which insured CEBRA's ongoing receivables from the client in Abu Dhabi. This gave CEBRA assurance that they would be paid for work done for which the customer had not yet paid.
Apart from non-payment from customers, a Contract Guarantee can also provide protection from political events that make it impossible to complete a transaction, and from losses associated with cancelled orders in which working capital is already tied up.