MAG IAS, based in Sterling, Michigan, is a leading machine tool and systems supplier serving the durable goods industry worldwide for metal cutting and composites applications. Key industrial markets served include aerospace, automotive and truck, heavy equipment, oil and gas, rail, solar energy, wind turbine production and general machining. MAG employs more than 1,000 workers in the Americas and operates through several business divisions and subsidiaries.
A letter of credit is issued by a lender on behalf of its principal to the third party as a guarantee of performance. Since both bonds and letters of credit are financial instruments, the pricing is driven largely by credit strength. These letters of credit are typically required as a condition for conducting business, especially for international transactions as well as large sales. In 2011, MAG had a contract backlog and needed more funds to cover standby letters of credit for performance bonds and collateral for advance customer deposits. Without EXIM, MAG would have to turn away business.
MAG had a $10 million EXIM working capital loan guarantee. The guaranteed lender was Burdale Capital Finance of Stamford, Conn., an asset-based lending institution. EXIM immediately doubled that guarantee to $20 million to support MAG's backlog and fulfill its export orders.
This financing enabled MAG to handle increased foreign demand for its products, which expanded its sales and helped it maintain approximately 100 high quality manufacturing jobs related to its export business. The EXIM working capital loan guarantee currently enables MAG to support $100 million in exports to customers in key markets including China, Brazil, and India. MAG was able to hire additional workers in areas that have been hit hard by the economic recession.
EXIM has supported $75 million of MAG's exports during the 2013 to 2018 period. This export strength has the potential toy add jobs in Fond du Lac, Wisc.; Hebron, Ky.; Port Huron, Wisc.; and Sterling Heights, Mich.