Structured Trade and Commodity Finance: What Can Go Wrong by John MacNamara

By John MacNamara

Structured exchange and commodity finance is outlined as cross-border exchange finance in rising markets the place the goal is to get repaid by means of the liquidation of a circulation of commodities. it really is an more and more very important sector of emerging-markets lending, yet its capability pitfalls have given it a bad snapshot between components of the monetary neighborhood. in spite of the fact that, in comparison to the other kind of lending or making an investment within the rising markets, based exchange and commodity bargains have tested an enviable song checklist of "survivability" lower than severe trying out. this can be a accomplished consultant to the speculation and perform of established exchange and commodity finance. It asks why a few dependent exchange offers fail whereas others be successful, utilizing quite a few case reports to demonstrate what can get it wrong. It discusses danger mitigation strategies intimately and exhibits tips to manage and hold higher buildings that would make sure final compensation. With an fascinating mixture of professional perception, useful suggestion and cautionary stories, prime authority, John MacNamara supplies bankers, commodity investors and different finance pros transparent directions for making a profitable based exchange and commodity finance product. He cautions opposed to the "danger quarter" the place self belief in utilizing the product may well simply outstrip adventure, and clarifies the professionals and cons of some of the structural parts, what they really safeguard opposed to and what kind of use they're in a drawback. The specific case experiences express how major banks like KBC and conventional have saved the doorways open for enterprise in a few demanding environments with nice luck. equally, candid debts display how different avid gamers received it flawed, leading to disastrous offers comparable to Sidanko, Eximcoop and Yukos. those examples illustrate what occurs if the constitution isn't really competently carried out, maintained or enforced, or no longer correctly dependent for the kind of distribution for use to promote the deal down. This illuminating e-book might help you to: take hold of the entire matters with regards to dependent exchange and commodity finance; detect the way to observe such buildings in perform; keep on with the do's and don'ts of documentation; research from the event of others via case stories illustrating either pitfalls and possibilities; comprehend the issues dealing with the foreign economic climate; determine and examine new funding possibilities; Optimize chance composition of cross-border lending or funding; Make sound judgements, reduce hazard and attain higher results. Who should still learn it? This instruction manual presents precious aid for banks which are already energetic in dependent exchange finance and want to construct on their good fortune, and an authoritative consultant for these contemplating coming into the sphere. between those that will gain are: dependent alternate and commodity finance departments; credits committees and alternate finance services in banks; Commodity manufacturers and investors; company treasurers; credits insurers; overseas advisors.

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Structured Trade and Commodity Finance: What Can Go Wrong and How to Avoid It

Dependent exchange and commodity finance is outlined as cross-border alternate finance in rising markets the place the goal is to get repaid by means of the liquidation of a movement of commodities. it's an more and more very important sector of emerging-markets lending, yet its strength pitfalls have given it a terrible picture between components of the monetary group.

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4. Oil delivered. 5. Commodities delivered to Commodity Trader/Offtaker. 6. Receivables flow back from commodity trader to Bank (offshore cashflow). 7. Residual value of commodity receivables after debt service flow back to local exporter. Note that the transaction is embodied in a general countertrade agreement or quadripartite agreement, and that state ownership provides linkage between local exporter and local importer. 33 STRUCTURED TRADE AND COMMODITY FINANCE IN EMERGING MARKETS STOCK/INVENTORY FINANCE Definition Stock finance is used here to mean the finance of goods in store at some mutually acceptable location.

The offtaker, however, plays a very important role in the success of the transaction and should be a credit enhancement (see Sidanko below as a case study compared with Graincoop Eximcoop). Applying these headings to our case studies, we can see that perhaps surprisingly none of them ran into trouble because of political or market risks, although both were clearly aggravating environmental events. Payment risk should be the least of our worries (although, as we will see, opinions are divided as to how payment risk should be covered).

The deal was brought to the bank by an existing offshore trading company, which wanted finance of the goods in-store while it sought a buyer in a nearby export market (Brazil). The trader was of insufficient financial strength on its own to present an acceptable payment risk. The ultimate aim was to sell the goods against a third party Brazilian bank L/C which would be acceptable to the financing bank. 34 TYPICAL STRUCTURES Warehouse Future offshore hard currency buyer 5. Future exports 2. Warehouse warrants 6.

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