Chocolate blue chip

During this current phase of heightened liquidity, trade finance assets that might otherwise appear unremarkable to lenders can become extremely attractive. With some fair fee arrangement and the lure of country risk diversification, the latest annual pre-export facility for the Ghana Cocoa Board (Cocobod) is a great example of this.

At a price of 20 basis points, clearly rewards for bankers went beyond the size of the margin. In answer to our question, ‘is the margin worth it, a spokesman for mandated lead arranger (MLA) Standard Chartered enthuses: ‘absolutely!”.

“The margin has decreased in line with market pricing in general,” they add. “The transaction has an impeccable track record and is bid for very aggressively.”

“The facility arranged for Cocobod in 2006 was the second largest to be arranged in the 14-year history of the deal,” says Laurent Moronval, from the soft commodities department of the natural resources division at co-MLA and bookrunner Natixis. “During syndication, the total amount was increased up to US$810mn from an initial request for US$600mn.”

Lead arrangers joining the MLAs were BayernLB, BHF Bank, BNP Paribas, Citigroup, DekaBank, Dresdner, DZ Bank, HSH Nordbank, KBC, Rabobank and RBS. BTMU and ICICI came into the deal as arrangers, and Bank Melli and LRP Landesbank Rheinland-Pfalz came in as co-arrangers. Law firm Denton Wilde Sapte advised the lenders, while Cocobod consulted local lawyers.

In a highly liquid market where banks have to hunt for assets whilst also looking to diversify their country risk liabilities, a company such as the Cocobod provides an ideal opportunity. Cocobod enjoys a quasi-sovereign risk within one of the few sub-Saharan African nations to have relatively low political risk. As such, this transaction provides good diversification for lenders, with little default risk. Indeed, Ghana Cocoa Board has never defaulted on any of its annual trade backed-facilities over the past 14 years.

“The risks with this deal are that Ghana does not produce sufficient cocoa for sale, in order to repay the facility,” states the Standard Chartered spokesman. “This is very unlikely due to Ghana’s unrivalled production record since inception of this facility.”

“To some extent, our motive for leading this deal with Standard Chartered was relationship-driven. Cocobod is an extremely well run organisation and now stands as the world’s second largest cocoa producer,” continues Moronval. “As a commodity bank, Natixis services its customers throughout the value chain, from pre-financing production in origin countries up to transformation in consuming countries. In this respect, arranging the Cocobod pre-export facility – the largest soft commodities syndicated transaction in Africa last year – makes perfect sense.”

As usual, proceeds of the loan are used to pre-finance the sale of cocoa from producers, with repayments secured by the receipts from the sale of the crop on the international cocoa market. So far, on an annual crop projection of at least 600,000 tonnes, Ghana’s Cocobod has purchased a cumulative 448,000 tonnes of cocoa beans.

Export proceeds are channelled through Ghana International Bank to the facility agent (Standard Chartered), to ensure appropriate cover ahead of monthly instalments.

In 2005, the Ghanaian borrower raised US$550mn from the pre-export market, for the higher price of 32.5bp. Calyon, RBS and Société Générale were MLAs. But this year, MLAs Natixis and Standard Chartered arranged a fee structure that more fairly shared the cake among all lenders. Tickets of US$50mn, US$30mn, US$20mn, US$10mn and US$5mn were offered to participating banks for fees of 46bp, 40bp, 36bp, 32bp and 27.5bp respectively.

In total, 28 international banks from 12 different countries joined in general syndication. And they eventually saw their commitments scaled back in order remain in line with Cocobod’s requirements.


Deal information

Borrower: Ghana Cocoa Board (Cocobod)
Amount: US$810mn
Mandated lead arrangers: Natixis; Standard Chartered Bank
Lead arrangers: BayernLB; BHF Bank; BNP Paribas; Citigroup; DekaBank; Dresdner; DZ Bank; HSH Nordbank; KBC; Rabobank; RBS
Arrangers: BTMU; ICICI
Co-arrangers: Bank Melli; LRP Landesbank Rheinland-Pfalz
Law firms: Denton Wilde Sapte (lenders)
Date signed: September 2006