Joint Venture Aims to Meet the Financial Needs of Supply Chains

Hennessey Capital Solutions, Babcock & Brown look to help suppliers accelerate receivables

Hennessey Capital Solutions, Babcock & Brown look to help suppliers accelerate receivables

New York — September 23, 2005 — International investment and advisory firm Babcock & Brown and Hennessey Capital Solutions (HCS) have formed a joint venture that they say will provide financing to supply chains worldwide.

This joint venture will implement the HCS EarlyPay platform, which the two companies said would enable suppliers to accelerate receivables as needed to meet demands for extra capital, strengthen balance sheets, lower financing costs and/or improve cash flow.

Businesses in many supply chains are forced to rely heavily on inflexible and expensive lending to finance working capital requirements. HCS said it developed its HCS EarlyPay program to address this problem and adapt to various supply chain environments.

As part of the deal, Babcock & Brown and ColumbusNova Partners, a New York-based investment fund, have committed $45 million in subordinated financing to the joint venture and have also retained an equity stake in HCS. HCS expects to leverage this capital with senior debt financing, which, it said, should enable the joint venture to initially provide up to $300 million of financing.

"The combination of HCS' outstanding technology and risk management capabilities and Babcock & Brown's financial capabilities should enable HCS, and the joint venture in particular, to take full advantage of the outstanding opportunities available in the marketplace," said Dan Brickman, global head of structured finance at Babcock & Brown.

HCS said it now has the ability to scale its HCS EarlyPay offering within the automotive industry and to establish its presence in other industries, including electronics, chemical/pharmaceutical, heavy manufacturing, retail and technology. These industries typically have significant levels of working capital tied up in financing extended payment terms, according to HCS. HCS and Babcock & Brown expect this to be the first step in a joint effort to build a global platform for HCS's EarlyPay supplier financing services.

"Our program is a win for both buyers and their suppliers," said Tom Cross, president of HCS Payment Services. "In addition, our joint venture with Babcock & Brown, a firm with critical expertise in asset finance and growing and developing finance businesses on a national and global scale, gives us the opportunity to expand the business rapidly."

Additional Articles of Interest

Tax and supply chain management are often considered to be two distinct disciplines, but this view misses an opportunity to leverage the business benefits achieved by an automated and integrated tax department. For more insights, read "Transaction Tax Management: A Seat at the Supply Chain Table," an exclusive.

— P-cards continue to advance, and e-payables solutions are making headway, but the convergence of the financial and physical supply chains is still a work in progress. Read more in "Enabling the Financial Supply and Demand Chain," in the April/May 2005 issue of Supply & Demand Chain Executive.

— A survey of consumer healthcare decision-makers shows opportunities for manufacturers to gain competitive advantage by focusing on some key points in their supply chains. Read more in the In Depth article "Leveraging the Supply Chain for Competitive Advantage."