FMC Technologies has had its share of challenges in putting together trade deals in the key emerging markets, places where the opportunities are big, but the financing takes a lot of skill and specialized resources.

The Houston machinery maker exports equipment and systems to three growth sectors-oilfields, food processing, and airports. It has often had to scramble to find suitable banks to work with in some of the riskier places, such as Romania, Algeria, Eastern Europe, Argentina, Egypt and Dubai.

And, many of its buyers are government-owned companies, or government agencies, that require up-front security in the form of performance and advance payment guarantees. The banks that arrange those structures need to be savvy, and have an appetite for risk.

A recent deal in Algeria, however, has made FMC Technologies a serious fan of Cleveland-based National City Bank, a rapidly growing institution (#7 in the U.S.) that has elevated the priority of its trade finance operations while pursuing the acquisition of other banks.

It put together a sophisticated structure to finance a $240 million FMC contract to help Sonatrach, the state-owned oil company, expand its export capacity. FMC produced and installed a group of large buoys linked to a pipeline that enables oil to be pumped into tankers.

The financing package required arranging $60 million in performance and advance payment guarantees, and confirming $203 million in letters of credit from an Algerian government bank, Banque Exterieure d'Algerie (BEA).

"We looked for banks to confirm the letters of credit, but found they had only $5 million internal limits for BEA," said Joseph Meyer, head of Treasury Operations at FMC Technologies. The company then decided to call in National City, which had helped it earlier on a Romanian deal.

The bank agreed to take a $10 million share of the required confirmation, and then set to work stitching together a group of banks to take the rest. The L/C package was actually more manageable than the $203 million total, since it supported a two-year project with multiple payments.

The payments were arranged as phases of the larger project, so exposure to the commercial and political risks involved was limited at any one time. The syndicate of banks worked with a monthly payment schedule, which meant breaking down the confirmation risk into more comfortable increments. FMC Technologies and National City arranged a rolling forecast of invoices for 90-day periods, and this was changed each month.

"National City went outside the box to deliver a structure for us on what has been a very important project," said Meyer. And, FMC did its part to see that National City Bank performed the key role in the financing package. The Algerian bank wanted a French institution with which it had an ongoing relationship to be a central player, but the U.S. exporter insisted on having National City in that position. It took a few weeks to achieve an agreement.

"It was really the people factor, the culture of the bank that excelled," Meyer remarked. "It showed an innovative attitude to solve the problems we faced."

In fact, National City Bank has had to absorb the cultures of several banks in putting together its trade team. "Four years ago, we began consolidating five international banking departments that had been bought," explained Craig Schurr, Senior Vice President-International Banking, at the Cleveland headquarters. And, it brought in some trade finance veterans from other banks, including Bank One and ABN Amro Bank, who joined the home-grown staff in expanding the group.

National City Bank has responded to the growing trade finance opportunities being created by the global supply chain in three ways. One has been to build a network of relationships with banks in key overseas markets, which supports U.S. trade transactions.

It has also established a network of consultants, mostly ex-bankers, in key countries to handle due diligence and underwriting on companies involved in the bank's deals. These specialists screen the required information locally, while the credit analysis is done in Cleveland.

In addition, National City has arranged two global guarantee frameworks with the Overseas Private Investment Corporation, the U.S. agency, to support its lending to banks and others in emerging markets. In 2003, it worked out a $35 million structure, and, in 2004, a $200 million capacity that help its correspondent bank operations. OPIC and the bank share in the lending risk.

A second pillar of its trade finance strategy has been heavy investment in software and Internet access for a growing Web-based service that integrates with its exporter-importer clients' in-house information operations and purchase order systems. The Web system supports the creation of letters of credit and other trade finance documents, and connects the clients' transactions on the portal to other parties involved.

Clients can designate a forwarder to have access to their Web portals, to facilitate tracking the letters of credit. A current priority is to further integrate forwarders into the client Web-based transactions.

The third leg of the National City Bank strategy is to provide short- and medium-term credit for its customers' trade activities. It is working closely with the U.S. Export-Import Bank in short-term insurance and working capital lending, as well as medium-term equipment deals ($500,000 and up).

The bank's trade customers range from large companies such as FMC Technologies ($2.5 billion in sales) to middle market and small firms. For one small firm, a manufacturer of flight simulators with $1.5 million in sales, it provided export working capital with a guarantee from the Small Business Administration.

At the same time, other large trade banks have been responding with their own unique set of structures and priorities, as the demands of the global supply chain create fresh opportunities to expand services to customers.

Wells Fargo Bank, with a San Francisco headquarters, a huge California presence, and a branch network in 23 states, chose a strategic alliance in the 1990s with HSBC Holdings in London. The two created Wells Fargo HSBC Trade Bank, known as "The Trade Bank," to combine Wells Fargo's large middle market export-importer customer base with the HSBC global network.

HSBC, founded in the 1860s as the Hong Kong and Shanghai Bank, a colonial institution, now has a sizable presence on every continent. The Trade Bank is an active user of Export-Import Bank insurance and guarantee programs, as well as a shareholder in Exporters Insurance Company in Bermuda, a unique "group captive insurer" that specializes in covering its members' trade credit and political risks.

And, significantly, in 2000, Wells Fargo launched its Commercial Electronic Office, a central gateway for its customers to interact through the Internet with its services in credit, international payments and collections, treasury management, and a host of other products.

The Seb program now boasts 25,000 active customers, says Danny Peltz, Executive Vice President, Wholesale Internet and Treasury Solutions. It lets clients distribute information and conduct transactions. In trade finance, that means initiating import and export letters of credit and other international transfers, and managing foreign exchange (customers can maintain multi-currency accounts).

Meanwhile, at Bank of America, long a major trade finance supplier with an international presence, two services have been highly visible nationwide in recent years. One is its leading role in export working capital lending, the other its Web-based support for the global supply chain.

In export working capital, Bank of America won an Export-Import Bank award for its active use of the U.S. agency's guarantee program. The bank has combined its focus on export-import services with its large nationwide small business-lending network to deliver the program.

Additionally, Bank of America has been moving toward a single Web-based global trade platform. The online program began with large volume users, but has gradually spread to middle market and smaller export-import customers, says Cheryl Sill, who manages Global Trade and Treasury Sales.

"Multiple users in a customer's organization can access the Web platform to see the critical information they need, once they have been approved for this privilege," she remarked. The system integrates customers' initial procurement operations with the reconciliation of financial and transport documents, and then completes the payment or collection procedure.

The next step for the big trade banks is to further narrow the gap between the global supply chain and the finance chain by adopting more common standards for electronic documents and their transfer. Information is now the common ingredient among the goods movers and the money movers.

The big banks are trying to narrow the gap on several fronts. One is Bolero.net, a unified platform created by SWIFT, the international bank communications network, and the TT Club, a transport group. The other is a new SWIFT service, recently designed, that performs like a utility open to many participants. Stay tuned.