Cashing in on a pickled IOU.(LIGHTER ACCOUNTS)

While underwriting credit risk for a previous employer, one of our customers in a poor island country experienced a fire at his food production facility. As a result of this fire, production was lost for several months and the customer, who had previously sported a stable but weak credit profile, went into an immediate cash flow squeeze. All of his open line on inventory and manufacturing had been used up prior to the fire, which also damaged some of his inventory. Existing cash quickly ran out and there was no source of liquidity while production was shut down, which left us in the hole with a mid-seven-figure exposure!

Weeks passed by and all traditional attempts to contact the buyer and collect the balance had failed. Coming from a poor country whose insurance runs through the government, the customer was having extreme difficulty getting paid by the government insurer (a government official had recently embezzled funds, leaving the government itself in a bind). The government was not releasing payments for any extraordinary liabilities that it controlled.

In an effort to expedite the insurance transaction and collect the funds, we decided to visit the island country. On the first of our two-day visit, we went to our customer who explained that he would not have the funding until the government paid him. So, we called the government insurance director who had the power to release a claims payment to the customer, who could then pay us. The director seemed sincere, understood our plight and set up a meeting for 1:00pm the next day. Well, about two hours prior to the meeting, we received a call informing us that he could not make our meeting until 5:00pm, a half-hour after our plane was scheduled to leave. (I later learned this was no coincidence. This government frequently avoided meetings with outsiders by postponing meeting times beyond the outsiders' flight time in the hopes that the outsider would not, or could not, burn another full day to catch the next plane out and get another hotel--and it almost worked!)

Frustrated and running out of options, one ...