TF Briefing Leaving the crisis behind

10 July 2017

TF Briefing

Leaving the crisis behind The pricing of Trafigura’s $500 million receivablesbacked securitisation last week, although tighter than recent deals, shows the long-lasting impact that the 2007-2008 financial crisis has had on the sector. Spreads on the three-tranche offering were tighter than recent deals, at 85bps over one-month Libor on the A1 tranche, 85bps over international swaps on the fixedrate A2 tranche, and 170bps over one-month Libor on the B tranche. The deal was also oversubscribed, attracting both new investors as well as previous buyers of Trafigura’s previous 144A issuance. But pricing is still far wider than the first public ABS deal from Trafigura, which was issued in May 2007 (see graph 1), before the crisis. That deal closed at 25bps over Libor on the A tranche, and 135bps on the B tranche. Laurent Christophe, head of corporate finance at Trafigura, tells Trade Finance that higher pricing on public ABS deals is a function of the crisis. “All asset classes were pricing much tighter before the global financial crisis”, he points out. “For instance, AAA top UK prime RMBS [residential mortgage-backed security] with a three-year weighed average life were pricing at Libor plus 5bps prior to the summer of 2007. Now they would price around Libor plus 30bps. So it is a generic market shift and not idiosyncratic to the commodity sector or Trafigura’s securitisation vehicle”, he adds. He also points out that the 2007 deal was issued in Reg S format, meaning it could not be sold within the US. The investors on that deal were mostly structured investment vehicles (SIVs), which have disappeared following the crisis. However, the last three ABS deals have been issued in 144A format, targeting different investors. The second public ABS deal under Trafigura’s securitisation programme, which closed in 2012 (see graph 2), priced considerably wider than the first deal. Despite launching four years after the financial crisis, and launched by a repeat issuer, the pricing on that deal was nowhere near the successful first issuance. Christophe says that receivables securitisations are a

“key pillar” of the firm’s funding strategy. As chart 3 shows, although the bulk of Trafigura’s outstanding loans consist of revolving credit facilities, public ABS issuances are an important part. This time round, Trafigura tried to widen the investor base further by issuing its first ever fixed-rate tranche, on the A2 portion. Despite the challenges posed by the events of 20072008, Trafigura has made good progress tightening spreads on its public receivables securitisations. With a new fixed-rate tranche, and with the tightest spreads since 2007, this latest ABS paves the way for further deals.

See Trade Finance's Q1 2017 League Tables here

To see more coverage of trade finance activity globally, or to access our market-leading database of verified trade finance transactions, click here to take a free trial to Trade Finance Analytics.

Mandate Mill

EFA Group has launched a new investment fund to provide receivables and supply chain financing to Asian SMEs. Export Development Canada will join commercial lenders for the expansion and refinancing of a $725 million methanol project in Oman. Mexican cement producer Cemex has solidified a Ps1.8 billion ($98 million) trade receivables securitisation, arranged by Finacity. The single underwriter on the transaction is thought to be Ixe Casa de Bolsa, a subsidiary of Ixe Grupo Financiero. An EIB spokesperson said that the partner banks on its second €400m ($454 million) Greek trade finance facility are HSBC, Citi, Commerzbank, Piraeus Bank, National Bank of Greece and Eurobank Ergasias. Turkish lender Garanti Bank closed its $250 million annual syndicated loan. The senior participants are Axis Bank, Banca Transilvania, Citibank, KDB, Raiffeisen Bank, Chexim, and Shanghai Commercial and Savings Bank. Afreximbank agreed several deals this week: a $1 billion financing facility for Nigerian conglomerate Dangote Industries, a $100 million facility for investment holding company Heirs Holding, and a $10 million term loan facility to the Development Bank of Rwanda.

Top Stories EDC signs $6.5m credit facility with battery exporter Export Development Canada has closed a $6.5 million contract financing credit facility with Corvus Energy, a lithium battery exporter in Richmond, Canada.

Trafigura prices $500m trade receivables securitisation Trafigura has priced a $500 million trade receivables securitisation in its fourth public asset-backed securities deal since 2004.

Fitch downgrades Noble despite credit line extension Fitch Ratings has downgraded Noble Group from “B-“ to “CCC” despite the struggling commodities trader winning a four-month extension to a key credit line earlier this month.

EIB launches second €400m trade Greek trade finance facility The European Investment Bank (EIB) has launched a €400 million ($455 million) trade and export finance facility for Greece, following the expiration of its first facility in December 2016.

INPEX signs JBIC, MUFG, SMBC debt for oil acquisition INPEX Corporation has signed a $566 million loan agreement with Japan’s Bank for International Cooperation (JBIC), MUFG, SMBC and BTMU for the acquisition of the ADCO Onshore Concession in Abu Dhabi.

All charts and underlying data from tradefinanceanalytics.com. To receive a demonstration of our services, to take a free trial or to speak to our news desk, please contact: [email protected].

Click here for Trade Finance's copyright policy. This email and the content it enables you to access form your copyright-protected issue of Trade Finance. If you wish to circulate our content please contact Trade Finance Helpdesk at [email protected] or +44 207 779 8721 to discuss multi-user access.

If you no longer wish to receive marketing from Trade Finance please click here. www.euromoneyplc.com 8 Bouverie Street, London EC4Y 8AX, United Kingdom.

2016 Euromoney Institutional Investor PLC.