As sole arranger and lender, Nigeria’s Stanbic IBTC – a member of the Standard Bank Group – successfully closed a US$15mn cocoa financing for Agro Traders (ATL) in November last year.

The facility, structured as a pre-export finance and made available in two tranches, will be used to support ATL’s purchase of cocoa beans from the 2009/10 Nigerian cocoa harvest, which it will export to Europe. Drum Resources Nigeria, a subsidiary of Drum Resources UK, will act as collateral manager to the transaction.

The transaction is one of the first applications of the Standard Bank Group’s dedicated trade finance lines from the IFC to support trade to and from Sub-Saharan Africa.

“This is arguably also the first such transaction to be provided in Nigeria by a local bank to a local exporter with documentation undertaken by a local legal counsel – in short, ‘Made in Nigeria’,” says Olu Ajayi, head of structured trade finance for Stanbic IBTC.

According to Ajayi, “the transaction provides significant support to the Nigerian cocoa industry, which is currently undergoing regeneration as part of the Nigerian federal government’s efforts to encourage the growth of the agricultural sector and to enhance the country’s non-oil exports and revenues”.

He adds that the transaction also provided much-needed access to US dollar funding and liquidity support to a local commodity trader at a time when a number of banks, both local and international, were withdrawing their US dollar liquidity lines and/or applying punitive interest rates to Nigerian corporate borrowers due to the global financial crisis and the current crisis engulfing the Nigerian banking sector.

ATL, based in Akure, south western Nigeria, is one of the largest cocoa exporters in the country, handling over 15% of the country’s cocoa output annually. Its customers include Cargill, Walter Matter, Natra and Barry Callebaut. As part of its expansion strategy, ATL is investing in value-added processing capacity and is currently building a new 20,000 metric tonne capacity cocoa processing plant in Akure. The plant is scheduled for commission in April 2010.

“Standard Bank has been expanding its trade business across Africa and in March 2009 set up a new structured trade finance unit in its Nigerian bank – Stanbic IBTC – to explore the many financing opportunities in Nigeria,” says Craig Polkinghorne, global head and director, structured trade and commodity finance at Standard Bank Corporate and Investment Banking. “This is the first structured trade finance transaction originated and closed by Stanbic IBTC.”

According to Polkinghorne, the interesting aspect to this transaction, and where the bank would like to develop the business in Nigeria, is in terms of the “in-country Nigerian trade finance team supporting the local businesses rather than always transacting from outside the country”.

He adds that it also supports the bank’s strategy of bringing experienced trade finance practitioners into the Nigerian market, thereby increasing the skills base in Lagos.

“Given that the IFC supported us through a US$400mn funding line destined for trade finance in Sub-Saharan Africa, this ability to originate transactions in West Africa supports our ability to transact in the continent. Our pipeline of trade deals is increasing in all the regions in which we operate, be it vanilla trade transactions or more complex structured trade transactions.”

Stanbic IBTC, a product of the merger between IBTC Chartered Bank and Stanbic Bank Nigeria, is Nigeria’s leading investment bank with a wealth of experience in advisory, privatisations and capital markets. The bank also has corporate and retail banking capabilities and a network of over 60 branches in all the major cities and commercials centres spread across
the geopolitical zones of Nigeria.

Deal information

Borrower: Agro Traders, Nigeria
Amount: US$15mn
Mandated lead arranger: Stanbic IBTC
Law firms: Banwo & Ighodalo (lender’s council); Abdulrahman Yusuf & Co (borrower’s council)
Tenor: 12 months
Date signed: November 16, 2009