Cash is the lifeblood of business and banking. But between disbursement and repayment, cash changes form — and with each change comes risks and weaknesses. The Five States of Cash Structuring Model was created to track these changes, to understand where lenders and investors lose control, and to learn from the most spectacular failures in Asia and beyond.
📌 Change 1: Disbursement Weakness
Cash raised doesn’t always reach the intended borrower. It can be diverted at the very start.
- Case: 1MDB and Goldman Sachs — Bonds were issued to raise funds for national development, but billions were disbursed to offshore accounts instead of the economic borrower.
- Weakness: Lack of controls on disbursement.
- Mitigation: Direct payment to verified counterparties, escrow accounts, and ring-fencing.
📌 Change 2: Diversion Weakness
Even if funds reach the borrower, they may be used for purposes other than what was agreed.
- Case: Hin Leong Trading — Loans meant for oil cargo financing were diverted to cover trading losses.
- Weakness: Borrowers had too much freedom in cash use.
- Mitigation: Tight structuring — financing linked to specific, realizable assets.
📌 Change 3: Performance Risk
This stage is fundamentally different. Structures can’t control whether a borrower successfully executes the business.
- Case: Evergrande — Apartments were built but couldn’t be sold fast enough, leaving debt unsustainable.
- Weakness: Dependence on business execution and market demand.
- Mitigation: Strong borrower capacity assessment and scenario testing, but no structural “fix.”
💡 Sidebar: Performance risk differs from the other four. It’s not about leakage or weakness in structure — it’s about the inherent uncertainty of business performance.
📌 Change 4: Collection Weakness
Even if goods are sold, will the cash actually be collected?
- Case 1: Greensill Capital — Advanced money against receivables that were doubtful or even non-existent.
- Case 2: Asian exporters — Shipped goods but couldn’t collect when buyers defaulted.
- Weakness: Over-reliance on receivables without independent verification.
- Mitigation: Credit insurance, factoring with recourse, strong buyer vetting.
📌 Change 5: Repayment Weakness
Even when collected, cash may never flow back to lenders or investors.
- Case: Related-party leakages — Owners divert repayment capacity through affiliates or regulatory barriers.
- Weakness: Last-mile leakage.
- Mitigation: Covenants, cash sweep structures, monitoring, and alignment of incentives.
🧭 The Repayment Journey in Summary
- Disbursement Weakness — Did the cash reach the right hands?
- Diversion Weakness — Was the cash used for its intended purpose?
- Performance Risk — Can the borrower execute?
- Collection Weakness — Did the cash come back from buyers?
- Repayment Weakness — Did lenders and investors get repaid?
The lesson is clear: cash doesn’t simply flow; it changes state. Each state carries its own vulnerabilities. The 5 States of Cash Structuring Model is about tracking those states, identifying weaknesses, and structuring transactions to protect value.
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- SEO Title: The Repayment Journey: Five States of Cash Structuring Explained with Real Asian Cases
- Meta Description: Discover the Repayment Journey through the Five States of Cash Structuring — disbursement, diversion, performance, collection, repayment. Learn from Asian case studies like 1MDB, Hin Leong, Evergrande, and Greensill.
- Focus Keywords: repayment journey, five states of cash, cash structuring model, disbursement risk, diversion weakness, performance risk, collection weakness, repayment weakness, 1MDB case, Hin Leong collapse, Evergrande debt crisis
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- Excerpt (for WordPress): The Repayment Journey tracks how cash changes state from disbursement to repayment — and where lenders lose control. Explore five critical states of cash structuring, with real Asian cases from 1MDB to Evergrande.
