Cover & spine - Trade Finance

DEALS OF THE YEARLocal flavour for Nigerian cocoa producerAgro Traders – trade finance revolverMLA: Stanbic IBTC Bank. Borrower: Agro Traders Limited (ATL). Amount: $15 million. Tenor: Average life = 8 months.Lawyers: Banwo & Ighodalo, Nigeria – for lenders; AbdulRahman Yusuf & Co, Nigeria – for borrower. Collateralmanager: Drum Resources UK.Diversification of the Nigerian economy is vital to the country’s development. Onesector that is ripe for targeting is agriculture, although very little financing has beenavailable to date largely because of the scarcity of lenders. This transaction breaks thatpicture. It is an overall $15 million revolving trade finance facility for Nigerian cocoaproducer Agro Traders Limited (ATL), proving that deals can get done where there isdedication, expertise and above all local input.The local presence in this case is arranger Stanbic IBTC Bank, a product of themerger between IBTC Chartered Bank and Stanbic Bank Nigeria Limited. It is nowpart of the Standard Bank Group. This deal is the first structured trade financetransaction originated and closed by Stanbic IBTC. In addition, it is arguably the firstsuch transaction to be provided in Nigeria by a local bank to a local exporter withdocumentation undertaken by a local legal counsel.On a wider footing, the transaction also represents one of the first applications ofStandard Bank Group’s dedicated trade finance line from IFC to support trade to andfrom the sub-Sahara Africa region. Although the structure of this deal is a traditionalpre-export finance structure for cocoa used elsewhere, it is relatively new to theNigerian market.Importantly, the deal provides much needed access to US dollar funding and liquiditysupport to a local commodity trader at a time when a number of banks, both local andinternational, were withdrawing their US dollar liquidity lines and/or applying punitiveinterest rates to Nigerian corporate borrowers due to the global financial crisis, and thecrisis engulfing the Nigerian banking sector.The overall $15 million funding is split into two tranches. Tranche A is for up to $15million to finance the main crop cocoa harvest in October 2009. Tranche B representsthe amount already repaid under Tranche A, for up to $5 million to finance the lightcrop cocoa harvest in May 2010. The aggregate utilisation under tranches A & B maynot exceed the facility amount. There is also a $4.5 million limit available to cover theforward exchange contract in respect of the borrower’s currency hedging requirement.The facility is short-term, revolving and self-liquidating – the average life of thefacility is eight months. Drawdown is only permitted against warrants (warehousereceipts) issued by Drum Resources UK, acting as the collateral manager for the bank.Repayment of the loan is from the proceeds of the offshore US dollar receivablesgenerated from ATL’s sale of cocoa to a panel of pre-approved offtakers (Cargill, WalterMatter, Natra etc).Olu Ajayi, head of structured trade finance at Stanbic IBTC in Lagos, comments: “Thedeal was put together at a difficult time in the Nigerian banking sector and demonstratesStandard Bank Group’s commitment to and support for the Nigerian government initiativeto regenerate and grow the agriculture sector as a major export sector and foreign exchangeearner away from the dominance of the oil sector.” ■24 TRADE FINANCE The Guide to Global Trade Finance Markets 2011