STRUCTURED TRADE AND COMMODITY FINANCE

COURSE OVERVIEW

A course bringing together trade finance product concepts, application to supply chains and financing structures typically used to facilitate commodity flows. The course is pegged at an intermediate level. Attendees are expected to be equipped with prior knowledge about mechanisms relating to Open Account, Letters of Credit, Bank Guarantees and Documentary Collections. For those less familiar with these topics, pre-course reading material will be provided

COURSE OBJECTIVES

• Enhance and develop an advanced knowledge of to today ’s Commodities markets, participants, lending structures, risks and mitigants, as well as innovation trends.
• Appreciate the challenges of the risk of managing physical commodities all along the value chain including producers, merchants, processors/consumers as well as the various stakeholders.
• Appreciate the options for an appropriate degree of due diligence
• Recognise that the risk profile and the due diligence requirements can be omitted by counterparties, the context, the value chain and the lending structures.
• Recognise and understand fully the relative strengths and weaknesses of structured deals (from bilateral transactional to more complex syndicated facilities).
• Recognise the pros and cons of technology innovations and solutions in STCF – Blockchain, DLT, AI & Machine Learning.
• To understand that structured trade finance as a risk mitigant is all about creating the right balance between risk and reward.

COURSE OUTLINE

Module 1: The Markets

• COVID – latest developments
• Brexit – Partly forgotten but now a live issue
• US elections
• US trade policy
• A high-level overview of
  • The markets
  • Commodities
  • The key players
  • Producers
  • Merchants
  • Processors
  • Transportation Services
  • Insurers
  • Banks
  • Specialist funders
  • General Trade finance overview – including latest COVID news
• Current Trends 

Module 2: Global Players

• Who are the key players
• The Key sectors
  • Agri & Food
  • Oil & Gas
  • Power
  • Mining & Metals
  • The rise of Green commodities
• What are the key risks involved
• How do traders make money
• Who are the main providers of finance
• Strategic activities of key merchants
• Case Study: Delegates are asked to consider the rise and fall of a leading commodity trader and establish what risks can be identified with the benefit of hindsight and what lessons can be learned. 

Module 3: Financing Techniques

• Open Account
• Collections
• L/C’s
• Escrow and advance payments
• Receivables and Invoice Discounting
• Innovations
  • Reverse factoring
  • Buyer centric solutions
  • Seller Centric solutions
  • Forfaiting
  • UPAS
• What are the risks
• What are the attractions
• What is “good” structure and what makes it “good”
• Case study: An example of an emerging market deal 

Module 4: Supply & Value Chains

• Following the Value chain
• Risks, mitigants & controls
• Opportunities, strengths & attractions
• Upstream, midstream & downstream structures
• Pre-financing, pre-payment and tolling structures
• Country risks
• Counterparty risks
• Bank risks
• Ownership & Control issues – the value of a trust deed
• Licenses, export quotas, currency controls, tariffs and other barriers
• Recourse
  • Full
  • Part or limited
  • Non-recourse
• What can go wrong – the signs and the mitigants
• The role and value of security
• The role and value of insurance solutions
• Case study: Real Life Example of a traditional pre-payment structure 

Module 5: Risk Management

• Using documentation
  • Contracts – Financial & commercial
  • Tri-party agreements
  • Liquidated damages
  • Transport documents
  • MMTD & BoL’s
• Understanding price mechanisms
• Hedging techniques
• Assessing the trading book and its inherent risks
• Financing initial and Variation Margin
• Case study: Example of an RBL

Module 6: Financing Commodities

• Inventory finance
• Borrowing Base
• Warehouse Finance – the risks in practice
• Repurchase agreements – pros & cons
• Commodity contracts
• Risk analysis of commodity flows
• Risk analysis of key parties
• Case study: Example of a borrowing Base Facility 

Module 7: Due Diligence & Monitoring

• The various options
• Risk-based approach
• Assessing key risks
• Considering key risk mitigants
  • Performance risks
  • Country risks – confiscation, embargo, currency etc.
  • Corporate risks – financials, cash flow, borrower, supplier, logistics etc.
  • Payment risks
  • Trade instrument risks
  • ‘Legal risks – jurisdiction and local law
  • AML risks
  • Sanctions risks
• Loan origination, appraisal, approval and commitment processes
• Syndications, forfeited and other shared facilities
• Monitoring and control options
• Case study: Major commodities in Indonesia and Europe

Module 8: Innovation

• Blockchain
• DLT
• AI & Machine Learning
• What are the advantages
• Game changers or a “flash in the pan”
• What are the risks
• What has happened in practice
• Case study: A block-chain example. 

Module 9: Non – Bank & Other specialised Lenders

• What are the alternatives
• Commodities Funds
• Mezzanine Finance
• How can banks work with these lenders
• IFC, World Bank. USAID
• ECA’s
• Case study: Considering the consequences of pushing innovation to the limit. What went wrong, why and how could it have been spotted/prevented. 

Module 10: Mores Specialist Commodities 

• Protein
• Green
• Aquaculture
• Strengths and Weaknesses
• Opportunities and threats
• Mitigants
• Attraction of participating

Module 11:  Price Risks 

• COVID’s huge influence on oil prices
• Price risk management
• Traded versus OTC
• Cash and futures markets
• Contracts to hedge
• Bank vs customer requirements/benefits