Source: Fortune
Summary
US importers are struggling to receive $166 billion in refunds on tariffs, which were deemed unlawful by the Supreme Court. Many companies are using their refund claims as collateral for loans, as they cannot afford to wait for the refunds. This move comes with risks, including the possibility of partial or rejected refunds, and interest accrued on loans exceeding the refund amount. Companies are weighing the risks and benefits of using refund claims as loan collateral, with some opting to sell their claims to hedge funds and liquidity specialists instead.
Our Reading
The numbers tell one story.
US importers are using their tariff refund claims as collateral for loans, a move that highlights the cash flow struggles many companies are facing. Alex Hennick, president and CEO of A.D. Hennick and Associates, notes that businesses are struggling due to supply chain woes, hiked energy prices, and nervous consumers. The use of refund claims as loan collateral comes with risks, including the possibility of partial or rejected refunds. Wes Harrell, a broker and head of a trading group at Seaport Global, warns that the interest accrued on loans may exceed the refund amount. As the refund process drags on, more companies may opt to sell their claims to hedge funds and liquidity specialists instead.
It’s a situation where companies are trading uncertainty for cash.
Author: Evan Null
