U.S.-based and Hong Kong-listed Samsonite is one of the world’s largest makers of travel goods and retailer, with products ranging from large suitcases to small toiletries bags. China is a key market for the firm, accounting for around eight percent of its global sales of $3.64 billion in 2019.
With the travel industry hard hit by the COVID-19 crisis, Samsonite, as a key manufacturer of travel goods, was not immune. Samsonite’s sales in China fell sharply as the pandemic swept across the country; while it had RMB 150 million in its cash coffers in January 2020, by April, it was servicing RMB 100 million in bank loans for urgent working capital needs like paying overhead expenses to keep businesses operational.
While the cheapest means of funding would be through freeing up internal cash, moving funds in and out of China vis a vis its overseas entities was a very manual and time-consuming process, involving a lot of paper documents and the need for regulatory approvals on a case by case basis. Tapping on bank loans remained an expensive alternative.
Samsonite China needed a treasury solution to mobilize funds in and out of China as necessary, and one that can be implemented quickly due to its urgent liquidity needs.
In collaboration with J.P. Morgan, Samsonite China implemented a 1+2 RMB two-way cross-border sweeping structure, with one Chinese entity and two overseas entities that are in Singapore and Australia – the first time such a cross-border structure has been set up for a company with just one Chinese entity that is based outside of the Shanghai Free Trade zone; Samsonite China’s entity is registered in Ningbo in Zhejiang province.
This was possible because of J.P. Morgan and Samsonite’s close collaboration with the China central bank under the Nationwide Cross-border RMB two-way sweeping regulatory scheme. The People’s Bank of China gave the approvals within a week of the submission of documents; implementation was also extremely prompt, with the structure ready within a month of regulatory approval and client’s readiness in documentation.
With the solution, Samsonite China now has the revolving ability to sweep a maximum of RMB 150 million in cash surplus to its entities in Singapore or Australia, or borrow a maximum of RMB 150 million from the entities. This is a fully automated solution where Samsonite had the ability to change the sweeping sequence and trigger timings as it sees fit. Any surplus cash in China can also be ultimately swept to Samsonite’s offshore entities indirectly, via a regional sweeping structure from Singapore / Australia through to Hong Kong, and from Hong Kong to offshore via a global sweeping structure.