Africa Trade Finance launches securitisation vehicle
London-based alternative financier Africa Trade Finance has partnered with French fund manager Acofi Gestion to launch an independent securitisation vehicle, aimed at bringing more funding capacity to the African trade finance market.
Under the name Africa Trade Finance SA, the securitisation structure is incorporated in Luxemburg and co-managed by the two companies.
The vehicle will bundle African trade finance loans together and sell them to investors, a method being used more frequently in the industry as a way of diversifying sources of funding.
Speaking to GTR, Christian Karam, director of Africa Trade Finance, says the vehicle will start issuing notes in the second quarter of 2017, and that the companies are looking to raise US$100mn by the end of the year.
“Our securitisation vehicle will sub-participate alongside international banks in trade assets on Africa, bringing additional capacity to the market. It will allow non-banks, insurance companies, multilateral institutions, and non-traditional trade financiers to invest into trade transactions related to Africa,” he says.
Founded in London in 2014, Africa Trade Finance focuses on the origination of African trade finance transactions, accompanying banks and ﬁnanciers in their lending activities in Africa.
The company arranged cumulative trade financing worth US$400mn in 2015, US$500mn in 2016, and expects a further 20% increase in 2017. It mostly arranges transactions for local banks in Africa, but will be looking to support corporates in the near future.
The company initiated the securitisation vehicle at the request of its investors, Karam explains.
“There is a high need for this type of vehicle,” he says. “Today, if you are a non-bank institution, it is very difficult to gain access to trade finance assets. Trade finance requires a proper strategy, an extensive trade finance operation and heavy compliance capabilities. Non-bank investors do not have this type of infrastructure in place, so for them our vehicle is the right conduit to enjoy this asset class, its mitigated risk and its attractive yield, without having to build up or duplicate what the banks already have.”
Karam adds that the decision to partner with Acofi Gestion was based on the French company’s expertise in fund management, as well as a strategic decision to get a broader reach across the African continent.
“London remains the major district for trade finance in general and particularly to the sub-Saharan countries, whilst Paris has always serviced better the French-speaking region in Africa. Our partnership with Acofi Gestion based in Paris enables us to achieve a diversified portfolio across the continent,” he says.
While the companies are initially targeting a volume of US$100mn, Karam expects the number to rise significantly in the future, given the trade finance shortage in Africa. “Once we have built a track record and a good performance for those investors, we expect them to increase their subscriptions.”
Ultimately, the goal is to bring increased capacity to the African trade finance market and help support trade flows in times when traditional banks are de-risking and more are moving away from Africa.
“There is a gap between the demand for liquidity and the current availability of financing which has lately been very sporadic towards Africa. Every time we have a small turbulence somewhere, the banks tend to reduce their funding limits, and regular trade flows are directly affected. We would like to bring liquidity into the market at all times, especially when liquidly is scarce,” Karam ends.take me back