White & Case Advises Trafigura on Pioneering Commodities Securitisation
Global law firm White & Case LLP has advised Trafigura, one of the world's leading independent commodity trading and logistics companies, on the establishment of the world's first 'true sale' commodities securitisation programme.
The programme is structured to an 'A' equivalent level and the initial US$470 million issuance finances Trafigura's crude oil and refined metals inventories across 12 jurisdictions in Europe, the Middle East and Asia-Pacific.
Trafigura sells these inventories in a 'true sale' to a new orphan SPV, Trafigura Commodities Funding (TCF). TCF does not form part of Trafigura's corporate family and is established in Singapore, where Trafigura's main corporate entity is based. TCF finances the purchase with the proceeds of senior variable funding notes issued privately to a group of investors, and a subordinated loan provided by Trafigura which primarily covers the basis risk between the cash price of the inventories and the futures which protect TCF from market risk, but which do not always perfectly match the grade of the inventories being hedged.
"With the capital charges for trade finance under Basel III increasing, the global commodities industry has been searching for a highly-rated capital markets solution to supplement the financing provided by banks," said London-based White & Case partner Chris McGarry, who led the Firm's deal team. "This transaction represents just such a solution for Trafigura, and should become a reference point for commodity financing.
"This pioneering commodities securitisation programme was brought to a successful conclusion after two years of effort to structure the issuer's assets to be self-liquidating and market neutral, while the 'A' equivalent rating was achieved by ensuring that the 'true sale' requirements of all asset jurisdictions were accommodated."
The White & Case team in London which advised on the transaction was led by partner Chris McGarry with support from associates James Jirtle and Luke O'Leary, as well as more than 30 other White & Case lawyers globally.
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