Investment Opportunities
NORANDINA FACTORING S.A.
THE PROJECT
NorAndina Ingieneria Financiera S.A. intends to form a factoring company with an initial investment of US$ 800 thousand and US$ 7.5 million in credit lines. A substantial portion of the initial investment requirement has already been committed by two sophisticated sponsors, NorAndina Ingeniera Financiera and Hernán Garrido-Lecca. NorAndina Ingeniera Financiera, is a leading investment advisory service to Peru's mid-sized businesses. Mr. Garrido-Lecca has held prominent positions in the Peruvian financial sector. He has been Vice-Chairman & CEO of Banco Internacional del Perú, Executive Director of Peru's Foreign Debt Committee, and Director of Financiera Nacional S.A., Interfip S.A. and Banco República. At the International Finance Corporation (IFC), he worked as an Investment Officer for the Latin America and Caribbean Division, where his primary responsibility were the IFC's transactions in Colombia. Presently, he is Chairman of Luna Cero S.A. (an internet based news and services firm) and a Director of Tandem Computers del Perú S.A., SCS S.A. (Sun Microsystems' country distributor) and he is member of the board of various financial, real estate, agro-business and commercial companies.
THE COMPANY
The Peruvian Banking Law defines a factoring company as one that purchases accounts receivable. Factoring is a financial alternative that permits a company to sell its accounts receivable, creating an immediate cash-flow. The factoring company pre-pays the receivable at a discount and administers the collection of the funds and their full value.
NorAndina Factoring will charge clients a 2% premium over its funding cost and a 1% administrative fee for providing factoring services. Monthly operating expenditures are expected to be $40,000. Therefore, NorAndina Factoring will reach its break-even operating level with an average monthly balance of US$ 1.3 million. With US$ 7.0 million in credit outstanding, NorAndina Factoring will be earning $170,000 a month.
THE MARKET
Recent market reforms in the financial sector allow for the development of the factoring market. The recently enacted General Financial System Law (Peruvian Banking Law of 12/6/96) permits the creation of new financial services companies, including factoring companies.
The initial market for factoring services will be composed of Peru's largest suppliers, which would benefit from improved liquidity. Medium sized companies will also be approached after an intensive evaluation. NorAndina has close relationships with some of the main economic Peruvian groups such as Rubini, Mur, Socosani, Picasso Candamo, and Fishman, all of which could represent an initial base of clients.
NorAndina Factoring Project Financing
(US$MM)
| Hernán Garrido-Lecca | 0.1 |
| NorAndina Ingenieria Financiera | 0.1 |
| Two Investors | 0.4 |
| Lines of Credit Total |
7.0 7.6 |
Initial Investment (US$)
| Profitability Studies, | 50,000 |
| Legal Fees | 20,000 |
| Office | 200,000 |
| Computers | 50,000 |
| Software | 50,000 |
| Publications | 3,000 |
| Furnishings | 100,000 |
| Other Equipment | 47,000 |
| Working Capital Total |
80,000 600,000 |
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