Trade Finance Corporation Limited (TFC), the new entity set up by David Sullivan after his departure from Noble, has completed its first structured deal since the formation of the company in October 20003. TFC acted as arranger and structuring advisor whilst UFJ Bank, Hong Kong, was the lender, facility and security agent. Although a small deal the idea was one of experimentation with the structure in order to work on more plantation projects going forward.
The deal involves a US$5mn pre-export loan to McCorry Timber Ltd, a Kota Kinabalu, Sabah-based trader for its purchase of Brazilian pine posts from Floresta Jatoba (Brasil) Ltda. The tenor is 14 months and the offtakers being end users of the pine wood in the US and Portugal. Pine posts are commonly used in the wine industry.
For this deal Sullivan worked with another ex-Noble man Jeremy Hampshire who is now running his own Hong Kong-based insurance brokerage, Trade Line Limited. Insurance was arranged from QBE over insolvency of the supplier and offtakers were wrapped with a Coface policy. All in the deal paid Libor +5%.
Floresta Jatoba (Brasil) Ltda owns and operates a unique reforestation project in less developed Brazil. The company has set out to establish an environmental factory combining the commercialisation of forestry products and the operation of an “energy forest”. The purpose is to generate energy from biomass and otherwise preserve and develop 90,000ha of land with commercial pine forest and environmental research. The plantation employs 500 people and exports 75% of production to Europe and 25% to US.
A unique production process of poles for agricultural wine production has been developed with a range of 46 distinct pine wood products.
McCorry Timber Ltd is a subsidiary of McCorry Holdings Ltd a Malaysia-based timber group trading plywood, sawn timber, veneer and pine posts. They are sourcing from Malaysia, Indonesia, China, Thailand, Cambodia, Brazil and Ecuador with over 65% of group sales going into US markets. McCorry supplies technical assistance to the mills and has a quality control team who circulate among the producers. This is the key to a successful timber business.
Trade Finance Corporation Ltd is working with UFJ Bank on a number of new deals including further support to McCorry.