Trafigura has launched an innovative funding programme which combines receivables finance, structured commodity finance, asset finance, supply chain finance and securitisation.
The US$470mn non-recourse funding programme was arranged by BTMU, DBS, Mizuho, Natixis, OCBC and Westpac, in what the participants claim is the first of its kind.
Trafigura Commodities Funding (TCF, as the programme is known) issued US$470mn of notes which were placed on a private basis with the banks involved. The proceeds of these notes, along with a loan from Trafigura, will be used by TCF to buy crude oil and refined metals.
It is believed that the asset programme will be sold as a rated asset on the capital markets. This will enable Trafigura to diversify its funding channels.
GTR understands that the programme was many months in the works. Trafigura’s head of corporate finance, Laurent Christophe, says: “This platform enables Trafigura to become a systematic issuer of notes backed by commodity inventories and ultimately to seek committed term financing in the asset-backed securities markets.”
Trafigura, as with most trading houses, is continually looking to strengthen its liquidity and this scalable product will offer it more flexibility than a straightforward borrowing base or line of credit.
The programme has a one-year tenor. Westpac’s head of structured and asset finance for Asia, Rahul Arora, was involved in the structuring. He tells GTR that the structure can help avoid some of the issues around commodity ownership and fraud that have plagued commodity finance in recent years.
He says: “The programme credit is enhanced by incorporating typical securitisation features: true sale of assets, segregation via an SPV, cash-flow waterfalls, eligibility criteria, portfolio parameters, third-party controls and credit subordination. The programme’s structure also addresses the many risks related to the ownership of commodities such as price, liquidity, storage as well as damage and theft of goods. To the best of our knowledge, it has not been done before.”
Since the financial crisis 10 years ago, trading houses have been looking for ways to diversify their borrowing. With the crisis came a scarcity of bank capital. Often, traders turned to funding their supply chains on their own, becoming large lenders in their own right. This practice continues today, but is one of many deployed by the larger traders in the world.
Note: this article was updated to reflect the fact that multiple banks were involved in the programme.