New Press Release from Liquid Asset Partners Re: EBR

[Scott]

^ Sure sounds like they're getting plans in place for continued support/production. I can imagine negotiating new contracts with former parts suppliers is a tough row to hoe. Some of them probably got burned pretty badly when EBR shut down. They're going to want cash up front until they're thoroughly convinced EBR will be in business for a LONG time.

I was just thinking about this because I saw it as one of the big barriers along with dealership costs and credit to cover those costs etc.

But then I was thinking a little more about this specific situation this morning. Normally a company would have about 30 days to pay their vendor and that's a nice little cushion that disappears if they have money problems and their vendors require cash-in-advance.

But rumor has it that they have parts to make about 300 bikes. Let's imagine they plan to start with 30 great dealers and go slow. Those 300 bikes will likely be a one year supply (assuming each of those dealers selling about 10 bikes). So they haven't put out a dime to suppliers over the first year.

So even if they are on cash-in-advance terms with their vendors, they're already way ahead of the game since they had 'free' parts to start with. Now when they start paying their vendors for new parts a year from now, they can imagine they're actually paying for those first parts used to manufacture the bikes that will be coming off the line in a couple weeks. Instead of 30 day payment terms, that's like 365 day payment terms.

And since they won't have those vendors coming after them for that first year, that gives them some flexibility in the terms they offer to dealers. They don't need to be paid NOW by dealers (or a financing company working with the dealers) because they don't have bills from their vendors coming due that they have to pay.

There are still a lot of hurdles to get past, but cash-flow might not be as big an issue as it would appear at first glance. A smart money manager may be able to work with the tough terms their suppliers and dealers are going to be demanding by using that prepaid inventory as a cash-cushion in place of the credit terms they would typically use as a cash-cushion.