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New players in the commodity finance space lack the commitment required to make a lasting impact, according to a panel in London.

Speaker at the Structured Commodity Finance conference said that while the past few years has seen banks from China join large commodity transactions, they lack the fortitude to stick around when something goes wrong.

Bernard Zonneveld, the global head of structured metals and energy finance at ING, told the conference and GTR that this was most apparent on the failed Stemcor refinancing of last year.

The beleaguered British steel giant had attempted to renew an US$850mn revolving credit facility (RCF), but the deal, which involved 17 banks, collapsed, with the parties eventually entering a standstill agreement.

Zonneveld said, in reference to the collapse: “As soon as the tide goes against them, the new banks are gone. The traditional banks stick in there. Will the Chinese banks stay? They are retrenching very quickly if something goes wrong.”

The structured commodity space was blown open to new players in 2011, with the absence of the French banks, which previously accounted for 30% to 40% of the global commodities finance trade, but which left the market in an effort to deleverage.

These banks are back on the scene, panellists confirmed, but are not operating at the volume at which they were four years ago.

Kris van Broekhoven, the global head of commodity trade finance at Citi, said that the French banks have lost a lot of good staff, with many of BNP Paribas’ commodity structurers joining trading houses. This, he thinks, may explain the increase in quality of deals launched by trading companies in recent years.

Last year, Glencore and Vitol led an US$9.3bn prepayment deal for Rosneft, which a host of top-tier banks joined at syndication. Traders also led a large syndicated deal in Chad, which they underwrote and financed, before syndicating it to a series of banks. This, said van Broekhoven, “shows guts and knowledge”.

The retrenchment of some European banks also opened the door to regional players. Orion Oil recently secured the first ever syndicated commodity loan funded exclusively by Central African banks, while John MacNamara, the global head of structured commodity trade finance at Deutsche Bank, said that Nigerian banks have had a “spectacular few years”.

An industry trend which has not worried commodities bankers, though, is companies self-arranging their own loans. In December 2013, Gazprom Neft, the Russian oil producer, self-arranged a US$2.15bn loan, on an unsecured five-year basis.
The loan is said to have been closed efficiently and successfully, but leading commodity financiers agree that this was mainly due to the company’s good name, as well as market conditions at the time.

Zonneveld said that Gazprom Neft came to the market at a good time, when there was plenty of liquidity, but few deals, enabling it to source willing lenders quite easily.

MacNamara added that the deal was an exception rather than a rule, given the complexity and ardour typically involved with structuring large commodities transactions. “All banks work slightly differently,” he said. “If you need more than 10 banks, it can be a big job – it’s hard work dealing with all those banks, and companies will find it easier dealing with one or two lead arrangers.”