Trafigura has signed a US$400mn loan with a syndicate of Middle East banks, showing increasing interest for commodity financing in the region.
The 12-month revolving borrowing base facility, signed at the end of August, was arranged by BNP Paribas and involved 11 Middle East banks, including Arab Petroleum Investments Corp (Apicorp), Commercial Bank of Qatar, Mashreq Bank, First Gulf Bank, Bank of Bahrain and Kuwait, Gulf International Bank Bahrain, Abu Dhabi Commercial Bank, Ahli United Bank, Doha Bank, Arab Bank and Union National Bank, Trafigura confirms to GTR.
The trading house adds that the involvement of Arab banks is not so much linked to a shortage of credit in Europe as a long-term strategy of financing diversification.
“We’re delighted to have completed the renewal of our annual US$400m borrowing base credit facility with a number of banks in the Middle East,” says Christophe Salmon, Trafigura’s chief financial officer Emea. “The facility will finance our local inventories and shows our continued commitment to the region.”
However, market sources believe this deal is evidence of a growing interest for commodity financing in the Middle East, as European banks’ lower access to US dollars has left a gap in the sector.
Stephen Holden, vice-president, head of international business at First Gulf Bank, tells GTR: “There’s undoubtedly been a pullback from some of the European banks, which has been an opportunity for other banks and encouraged companies to look at new banks as well.”
The bank, which has offices in the UAE and in Singapore and does a lot of business with Trafigura, has registered a rise in demand for commodity financing, and Holden adds that competition has also increased between banks in the Middle East.
“A number of the major trading houses are important clients of ours and we’ve seen an increase in business with them, both in Singapore and in the UAE. We’ve seen a lot of uptake in competition from our regional neighbours in the Middle East.”
He believes that this trend is likely to grow in the future, influenced not only by the gap left by traditional financiers, but also by the price of oil. “If the price of oil goes up, your financing requirements are greater for the same volume of oil, so as a result, the number of banks they deal with may also be determined by the price of oil.”