Pre-financing of Coffee Exports — Using Letters of Credit

Coffee prices were higher than normal due to frost and drought damage to crops in Latin America. An African coffee processor, Africof, wished to take advantage of this opportunity to get a good price on the international market. It did not have the working capital necessary to pay cash to the growers within a week of purchase and wait for payment under letter of credit to come through from the international buyers. A pre-financing facility needed to be arranged and in order to be able to cover a succession of shipments the facility had to be renewable after each drawing.