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Lebanon-focused trade finance fund Cedar Oxygen has arranged a facility for a domestic snack manufacturer, completing its first deal since launching last year.

It involves Cedar Oxygen providing a revolving credit line with a maximum tenor of 180 days to nut and snack firm Lebanese Roasting Group.

A spokesperson for the Luxembourg-based trade finance fund declined to comment on the size of the deal, but says that its first transaction financed the import of raw materials.

They add that the firm has plans to onboard more clients, and has approved an “initial batch” of applicants through its investment and credit committee, and is in the process of closing “two to four” more deals this month.

Cedar Oxygen was launched in mid-2020 with US$175mn in seed funding from the Central Bank of Lebanon, and is aiming to provide manufacturers in the country with access to short-term trade and supply chain finance products, such as import, export and receivables finance, which will be available to both exporters and importers.

When the fund was rolled out, Cedar Oxygen said that it would also look to bring in funding from development financial institutions (DFIs), as well as backing from private sources, such as Lebanon’s expat community.

The Central Bank is currently the only backer of the fund, though the company says it is working to raise additional funds of up to US$500mn in a dedicated regulated alternative investment fund (RAIF) structure.

The spokesperson notes that the firm is in “detailed discussions” with select anchor investors as it sets up this new fund structure, and adds that these potential backers are mostly DFIs.

Speaking about its first deal, Mark Smyth, Cedar Oxygen’s chief investment officer, says: “Lebanese Roasting Group is typical of the type of company we are looking to support as it has a robust business model and serves an attractive, international market, but faces difficulties due to a lack of trade financing. Similar deployments will enable us to mitigate risks and deliver stable returns to international investors.”

 

Lebanese economy in freefall

Lebanon’s economy had been in dire straits before the effects last year of both Covid-19 and a tragic explosion in the country’s capital, Beirut, took their toll.

The country was plunged into a financial crisis in October 2019, which hit the banking system and exchange rate, and hampered the ability of Lebanese businesses to access US dollars in the early months of last year.

According to a report from Reuters at the time, some banks had stopped dispensing dollars in March.

Speaking to GTR about the situation in the country in May, Rudolf Putz, head of the EBRD’s Trade Facilitation Programme, said: “It’s very difficult currently for importers in Lebanon to get access to US dollars, because they do not have sufficient exports to generate dollars. And they have problems in getting international banks to lend US dollars, which makes it difficult to import any merchandise.”

Yet the pandemic and the devastating blast at the Port of Beirut in August have compounded the situation further, with a World Bank report showing that damage to physical stock as a result of the explosion could cost as much as US$4.6bn.

Last month, the World Bank noted in a separate paper that Lebanon’s besieged economy is expected to shrink by 19.2% in 2020, having fallen by 6.7% the previous year.

“Of the three crises, the economic crisis has by far had the largest – and the most persistent – negative impact,” reads the report. “ Exchange market pressures stifle trade and corporate finance in the highly dollarized economy, constraining the importation of capital and final goods, and inducing disruptions all along the supply chain.”