Related News

FSB fires warning to commodity traders over liquidity risks

UK firms pursue supply chain transparency amid regulatory pressures: Santander

Banks must adapt to survive as commodity finance demand slumps

Olam bags US$625mn shariah-compliant facility

Jansma to become Trafigura CFO as Salmon steps down

Global commodity trader Trafigura has closed a US$2.4bn financing package with a group of Asian and Middle Eastern lenders, and an US$800mn loan guaranteed by Germany’s export credit agency (ECA) to deliver strategic commodities to the European country.

The financing package – made up of a 365-day US$685mn US dollar revolving credit facility, a one-year US$1.22bn CNH term loan facility, and a three-year US$469mn US dollar term loan facility – was substantially oversubscribed and upsized from its initial launch amount of US$1.75bn, with 28 financial institutions participating in the transaction, including three new lenders.

Trafigura mandated DBS Bank and the Singapore branches of Standard Chartered and SMBC as mandated lead arrangers and bookrunners. DBS also acted as global co-ordinator of the transaction. In total, 22 financial institutions joined the US dollar tranches of the facilities during syndication.

Agricultural Bank of China Shanghai Huangpu branch, Bank of Communications Shanghai Putuo sub-branch, China Construction Bank Shanghai Pudong sub-branch and the Export-Import Bank of China were the mandated lead arrangers and bookrunners in connection with the CNH syndication of the facilities. In total, 10 financial institutions joined the CNH tranche during syndication.

The new facilities will be used to refinance the trader’s maturing three-year term loan tranche from 2019 and its maturing one-year US dollar and one-year CNH tranches from 2021, as well as for general corporate purposes.

A Trafigura spokesperson tells GTR the company has again agreed to tie the financing terms of the RCF agreement to its performance on specific ESG targets. The KPIs used are the same as in its US$5.3bn European multi-currency syndicated RCF signed earlier this year: a reduction of scope 1 and 2 greenhouse gas emissions; growth of the renewable energy portfolio; and bringing sourcing of metals in line with those outlined by ISO 20400 – an international standard for sustainable procurement.

“We are very pleased with the outcome of the syndication, with a closing amount in line with last year’s record,” says Christophe Salmon, group chief financial officer at Trafigura. “This demonstrates once again our strong access to committed sources of funding from the banking markets across Asia Pacific and Middle East. We are particularly satisfied with the growth in the size of the term loan facilities. As a result, Trafigura continues to increase its available liquidity to manage potential price volatility ahead of the winter season.”

Separately, the trader has also entered into a five-year loan guaranteed by the government of Germany, acting through Euler Hermes Aktiengesellschaft, to support a commitment to deliver up to 500,000 tonnes of non-ferrous metals into Germany under a five-year supply agreement.

The US$800mn deal was underwritten and arranged by Société Générale and syndicated to seven participating banks, and the ECA guarantee is provided under Germany’s untied loan programme – a tool to secure the long-term delivery of strategic commodities to Germany.

“The support of the untied loan programme has enabled Trafigura to take on a long-term commitment to supply strategic commodities to German industry,” says Kostas Bintas, Trafigura’s co-head of metals and minerals.

In recent months, concerns have been mounting in the European Union over supply disruptions to critical minerals such as refined copper, nickel and palladium, given their role in producing modern and renewable technology. In a report published last year, the International Energy Agency (IEA) estimated consumption of these raw materials could grow sixfold by 2050 amid surging demand linked to the energy transition – although supply may not grow at the same pace.

To ensure their domestic manufacturers can access the critical minerals they need in the years to come, a growing number of countries are leveraging the might of their ECAs to strengthen their raw material supply chains.

In May this year, US Exim president Reta Jo Lewis told GTR critical minerals are “a key area of interest”, with the US ECA “evaluating a few transactions that would help diversify the US’ supply of certain critical minerals globally”, while this July saw the UK government unveil its own critical minerals strategy as part of measures to ensure the country’s long-term security of supply.

For its part, Germany published its first raw materials strategy a little over a decade ago and updated it in January 2020 amid souring relations between the West and China, which dominates supply chains for many of those minerals.

With its agreement with Trafigura – which also included a review of the trader’s environmental, social and governance policies and performance – the German government is putting its strategy into practice, shoring up the supply of strategic commodities used in its renewable energy, electronics and chemical industries, as well as by suppliers to the construction and car industries.