1 - Banks can advise troubled borrowers to trade excess inventory or under-utilized production time for goods and services it would normally purchase with cash. This type of trade improves the borrower's cash flow, thereby freeing up cash to repay loans or improve the balance sheet.

2 - If a borrower is a member of a barter exchange and he/she is behind on their bank loan, the borrower can assign his/her trade credit to the bank. When the bank uses the credits to acquire goods and services through the barter exchange, the borrower's debt is reduced by the amount used.

3 - When a borrower defaults on a loan, the bank may have to seize the borrower's collateral. These tangible assets must be converted to cash for the bank to recoup any of its investment. Typically, the bank has to settle for a fraction of the assets value. Barter may offer a more satisfactory alternative, enabling the bank to trade the assets for FULL value. Instead of taking a severe loss, the bank can recapture a good part of the outstanding debt.

4 - Some companies that do business overseas may find themselves unexpectedly cash poor and therefore unable to make good on domestic loans. This is because many developing countries do not permit their currencies to cross the borders.

Barter may be able to "free" the blocked currencies. The company might use the unreleased foreign funds to buy a local product, which can be exported and traded for value. As an alternative, a trading company could acquire the blocked funds and convert them to tradable assets. The company to which those funds are due would be compensated with trade credits that it could use to obtain needed services and goods.

THE ABOVE INFORMATION IS AN EXCERPT FROM "ABA BANKING JOURNAL" DATED OCTOBER 1986.

 COPY SUCCESS!

PepsiCo SIGNED BIGGEST BARTER
DEAL IN U.S. SOVIET TRADE

PepsiCo Inc. signed the biggest barter deal in U.S. Soviet trade history. Doubling existing Vodka for Pepsi Cola, the Soviets agreed to increase shipments of premium Stolichnaya Vodka over a ten year period and the transfer title to 10 Soviet-built oceangoing ships to PepsiCo. PepsiCo will increase its production of Pepsi-Cola in the Soviet Union to almost two billion bottles annually by the year 2000. PepsiCo executives said that this bartering contract would be worth an estimated $3.5 billion in revenue over the next 10 years.

JERRY JASINOWSKI
NATIONAL ASSN. OF MANUFACTURES

"I'm struck by the number of firms that are turning to bartering and using it innovatively to add to their marketing capability. It's something in the nature of a bartering revolution."

OLYMPICS

Observers say that awareness of bartering widened because of Peter Ueberroth's enthusiastic use of it in connection with the Olympics. He bartered the promotional value of his Olympic logo....United Airlines provided free transportation, Buick gave them 500 autos, Fuji Film 250,000 rolls of film...etc, etc.

WILKINSON SWORD

When Wilkinson Sword drew up a marketing plan for its disposable travel shaver, the plan called for bartering some of its knives to pay for advertising for the shavers.

XEROX CORP

Xerox executed one of the largest domestic barter transactions when it offered approximately two million dollars worth of computers and copiers for trading.

EXCERPT FROM
The New York Times
Dated Sunday, December 9, 1990

Ask McDonnel-Douglas Helicopter Co.
& ESPN CABLE STATION

Bartering is regaining its glamour as everyone scrambles to deal with recession.

There were lots of things the McDonnell-Douglas Helicopter Company could do with the $16 million worth of nuts, bolts, washers and screws cluttering up its warehouse. It could keep them, at a huge carrying cost. It could sell them to liquidators, for maybe 3 cents on the dollar. Or, it could trade them for goods and services.

"We went over every possibility for getting the most out of these excess materials, and trade was by far the best," said Gary Pacific, McDonnell's manager of counter trade. He struck a deal with a reciprocal trade company (bartering exchange), which gave him credits to use on hotel rooms, airline tickets, car rentals - even telecommunications consulting services - in exchange for the hardware.

With recession looming large, more companies are seeking new ways to turn excess capacity or materials into assets. The result is that barter, long common in international trade, is getting popular domestically, too.

Paul E. Suplizio, executive director of the International Reciprocal Trade Association, in Alexandria, Va., guesses that the various form of barter specialists handled trades worth more that $5 billions this year, and that the number is about to soar.

"I'm getting a lot more calls from people who hope that barter will help them move excess inventories during the coming recession" he said.

Broadcasters, cruise lines and other companies with high fixed costs but low costs of delivering excess products use barter as a crucial source of financing, particularly when they are starting up. For example, when ESPN Inc. was still a fledging cable sports channel, a New York "barter finance" company, provided it with some expensive broadcasting equipment in exchange for a stream of 30 second commercial time

 slots. "We loved the concept of acquiring needed equipment without any out-of-pocket costs," said Robert M. Jeremiah, ESPN's vice president of advertising sales.