Integrated steel manufacturer JSW Steel has signed a five-year US$700mn advance payment and supply agreement with Swiss trader Duferco International Trading Holding (DITH).
The deal, brokered by BNP Paribas, Citi, Credit Suisse, ING, Mashreqbank, Natixis, Société Générale and Standard Chartered, is “the largest trade finance facility to have been arranged in the Indian steel sector”, according to the company.
The financing structure provides JSW with long-term funding secured by committed exports of steel products to Duferco, while Duferco is assured a captive supply of steel products for the term of the agreement.
Commenting on the transaction, Seshagiri Rao, JSW Steel’s group CFO, says: “The structured long-term trade finance transaction is an important deal in diversifying the sources of financing for JSW Steel. This not only enables JSW to raise funds at competitive rates but also assures incremental volume of sales in export markets, leveraging the widespread global network of the DITH Group. This transaction is a win-win for both organisations.”
This isn’t the first time the two firms have entered into a trade financing arrangement. In 2006, ABN AMRO, KBC, KfW Ipex-Bank and Standard Chartered arranged a similar, albeit smaller, structure, which saw a US$150mn pass-through pre-export facility repaid through the delivery of steel products from JSW to Duferco.
“We are delighted to have concluded such a significant structured trade finance transaction,” says Matthew De Morgan, DITH group CEO. “This corroborates our faith in the sustainability of steel trading and indeed is a material statement of confidence in the reliability of our partner JSW.”