Case Study 2: Texas Bonds A middleparty, Texas Bonds, have approached their bank with a request for the issuance of demand guarantees to an endbuyer in Africa in respect of the sale of three machines for the total sales value of USD 2.8m. The machines are to be purchased by Texas Bonds for USD 2.184m from the manufacturer in South East Asia and shipped direct to Africa. Supply lead time is as follows: 0 Machine 1 USD 0.654m to be shipped in month 4 0 Machine 2 USD 0.846m to be shipped in month 5 0 Machine 3 USE) 1.3m to be shipped in month 7" The endbuyer in Africa is to pay Texas Bonds by export letter ofcredit, payable 750 days after the date of shipment The manufacturer in South East Asia requires Texas Bonds to arrange the issuance ofa.n import letter of credit in their favour, payable 45 days after the date of shipment. Texas Bonds have been able to negotiate an advance payment of 30%: of the contract value from the endbuyer. The following demand guarantees are to be issued in favour of the end buyer on contract signature: 0 Advance payment giarantee USD 0.84m [33%) valid for 8 months 0 Performance guarantee USD 0.280m (10%.) valid for 12 months 0 warranty guarantee USD 0.280m valid for 24 months The bank of Texas Bonds wish to minimise their risk exposure on this transaction and therefore need to consider the best way of structuring the deal. Questions: 1. What are the risks for Texas Bonds? 2. What are the options for Texas Bonds? 3. Develop terms of payment