Synthesis Corporate Introduction
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About Structured Trade Finance
|Issuer||Synthesis Trade Finance I S.A.|
|Currency||USD (also on ASW in EUR and GBP)|
|Seniority||Senior pari passu notes with an excess spread roll-up|
|Size||USD 100 mio|
|Listing||Euro-MTF Market of the Luxembourg Stock Exchange|
|Auditor||Price Waterhouse Coopers|
|Legal Counsel for the Borrower||Allen & Overy, Luxembourg|
|Coupon||6.50%||4.00% + 3M $ LIBOR|
|Maturity||3 Years||3 Year, 5 Year|
|Look-Through and Consultation||Yes||Yes|
|Credit Enhancement||Yes (CI or LC)||Yes (CI or LC)|
Our bond structures assume:
- The credit is structured around an export contract between an exporter (the seller) and an off-taker (the buyer). Synthesis has the receivables assigned to its account(s), and repayment is further enhanced by secure payment method including Letter of Credit or Cash Against Documents supported by credit insurance or payment guarantee.
- A diversification cap of 20%per commodity and geography
|Loan Administrator||Synthesis Structured Commodity TradeFinance Limited|
|Currency||USD (also on ASW in EUR and GBP)|
|Seniority||Senior, direct lending exposure|
|Underlying Documentation||Master Loan Participation Agreement|
|Typical Structure||Pre-Agreed Counterparties with 48 hours notice of drawdown on a funded basis|
|Diversification||At the discretion of the lender|
|Wind-up Period||3 months|
|Structure||Bullet Facility||Extendable Facility|
|Average Yield||6.00%||4.00% + 3M $ LIBOR|
|Maturity||12 Months||1 Year +1 Year|
|Look-Through and Consultation||Yes||Yes|
Our participation structuresassume :
- Sensible diversification
- Pre-agreed “facilities” that define transactional drawdowns
Background and Entities
Synthesis Group of Companies
Synthesis Trade Finance S.A.
STF is a bankruptcy remote company, set up purely to finance structured trade finance transactions. It has an independent Board of Directors with a long experience of the management of collective investment vehicles, risk management and compliance. The Board of Directors is supported by a team of expert Special Advisors in the field of trade financeFixed Income
Synthesis Structured Commodity Trade Finance Limited
SSCTF is the UK- based company which originates business. SSCTF works with companies to structure solutions to their financial requirements and helps to arrange funding and a strong security package before arranging funding via STF or via participation agreements
About Structured Finance
About the product
What is the Structured Trade Finance
Structured Trade Finance is the provision of funds to allow commercial transactions to occur between counterparties in different jurisdictions
Traditionally it has been a business controlled by banks, but in recent years more and moreopportunities have arisen for non- bank participants to participate in the sector. Synthesis is the first financial institution to independently securitise trade finance assets
Transactions are typically very short in duration (between 15 and 90 days). Where we can obtain very strong collateral, a maximum of 10% of our portfolio will finance transactions of up to 124 days
The focus of a trade finance transaction is upon the value of the goods being transported, not the balance sheet of the seller, giving us excellent security
Why is there a lack of trade finance?
Banks have higher costs and smaller balance sheets
Banks are less likely to provide trade finance credit lines now than in the past. There are several reasons for this. First, the operational costs of financing small transactions can be quite high as it can require large teams of people for a very small margin per transaction. Secondly, many transactions are cross- border and where a bank does not operate in both jurisdictions they may decline to take on such business. Finally, many trade finance transactions are for large amounts compared with the equity value of the company
Banks are focussed on larger clients
With the right experience and understanding of global trade flow, a new breed of trade finance house is emerging, able to lend based upon assets. Synthesis Trade Finance is at the forefront of this transformation
Banks can’t make decisions about clients quickly enough
Banks take time to make decisions. With our strong knowledge of the sector and streamlined risk management and cash management we can generally make a decision very quickly, which is key to companies trying to finance orders andinventory
Why does Synthesis fund trade finance?
Trade finance transactions have a natural conclusion (the sale of the underlying goods) and have little risk of unforeseeable delays in repaymentStrong Security
When we enter into a transaction we typically (although not exclusively) step in as seller, acquiring all of the legal title, the rights to payment from the buyer and any credit support
Due to the short duration of the transactions, yields on them tend to be higher than on longer, balance- sheet loans, meaning that returns on efficiently deployed capital are higherLow Default Rates
Trade finance typically funds genuine commercial transactions. With the additional protection of Letters of Credit or Credit Insurance, default rates are far below those of standard corporate loans*
Trade Finance in Numbers
The sheer scale of global trade is staggering and this offers a huge market in which Synthesis Trade Finance can operate
WTO Member Exports per year
Despite global economic uncertainty, global trade continues to grow year-on-year as globalisation continues
The SME share ofthat trade
SMEs, particularly in fast developing economies, are an increasingly large part of the global supply chain
Of that SME business struggles to obtain funding
As Basel III increases pressure on bank balance sheets, SMEs are proving to be the main victims of the funding drought
Is the historic default rate according to ICC Data
If well structured, trade finance transactions can be considered extremely low risk in comparison to other forms of credit investment
How we operate
How our business operates
Our business model is similar to financing that has been carried on for centuries. We provide funding for companies who have strong business models but need outside help to finance their larger transactions
We are not a lender in a traditional manner and we do not provide loans to companies. All funding that we provide is repaid upon completion of the transaction and our exposure ends at that point.2. We step directly into the transaction.
Most of the transactions that we finance are the simple sales of goods to end buyers. In this case, we are bridging the time gap between dispatch of the goods by the supplier, and receipt by the buyer. W e pay the seller directly, we take ownership of the goods until receipt, and collect sales proceeds directly from the buyer.3. We always require secured method of payment.
Where letter of credit or credit insurance is not feasible or customary we would require that final buyer pays through Cash Against Documents arrangement plus payment guarantee/performance bond.
In many of our financing activities there can be multiple companies involved – buyers, sellers, shipping companies, warehouses and intermediaries. We have very clear selection procedures on who we will transact with
Minimum three year track record
All of our counterparties must be able to demonstrate that their management has at least three years of experience similar transaction. With all transactions being less than 124 days, this means that it will have taken place successfully multiple times alreadyEach counterparty must then :
- Be able to satisfy our KYC and AML procedures for the company, its management and its shareholders
- Be able to demonstrate a solid client base that is in line with our policies
Unlike traditional bank lending, we are funding specific transactions, so even if we agree to provide funding for a counterparty, we will first ensure that the money will be used for a specific transaction that meets our requirements and the money is returned as soon as that transaction is completed
The assets that we finance must be fungible and have a liquid market. This means that we focus on non-perishable, quality- checked goods, typically either listed on a mercantile exchange or with a particularly well- developed OTC marketCredit Enhancement
The transactions that we finance are always backed by a Letter of Credit or Credit insurance from an investment grade counterparty, or by alternative arrangements ensuring prompt and secure payment by the customer (performance bonds, payment guarantees)
Typically we look at a “real” valuation of the asset in terms of what price it can be sold at in a variety of jurisdictions as well as only lending relative to the purchase priceMonitoring and Control
Are we able to identify, monitor and exercise control over the asset at any point during the transaction?
Establishing a Trade Finance Facility
- -Referrals from existing clients
-Pre-existing contacts of Team Members
-Referrals from existing transaction originators
-Unsolicited client approaches
-Compliance Catalyst via Bureau van Dijk
-Procedure covers all steps in the transaction chain
-Managed via internal CMS system and multiple sign-offs are needed
-The Facility Letter is indicative and is subject to Lender approval
-It lays out terms but is not binding for its duration
-Contains CPsand CSs that will be essential for each underlying trade
-Does it meet the Lender’s criteria?
-Is the product fungible and can we assert security?
-Are the management team credible?
-Are there any regulatory hurdles?
-Can the transaction be structured in a way that suits the lender?
-Is there sufficient margin to makethe transaction work?
-Are we in control at all points of the transaction?
-Should the IFOL be accepted, full KYC and facility information is submitted to the Lender for approval
-Final negotiation of terms occurs
-Preparations made to transact shortly
Drawing down on a Facility
- -Client contacts us to confirm that the transaction meets the terms of the Facility Offer Letter
- -Lender is notified of the need to provide funding and we confirm that CSs have been met
- -SSCTF constantly monitors documentation and location of the stock throughout
- -SSCTF reviews the transaction for any irregularities and ensures that KYC checks are inplace
- -Funding is released by SSCTF to the Seller, enabling the transaction to occur promptly
- -SSCTF accept repayment and disburse as appropriate to lenders
Supplier Performance Risk:
All Suppliers will undergo KYCprocedures by SSCTF,including ascertaining and monitoring their ability to supply in a timely manner and their marketreputation.
Obtaining Good Title:
SSCTF will confirm that the Supplier has good title to the goods prior to sale.
Quality and Quantity of Collateral:
All goods will be quality and quantity approved by an approved third party before release of funds to ensure that they will meet the purchaser's requirements upon delivery.
Swap Counterparty and Price Risk:
The Purchase and Sale prices will be determined before the Purchase and any foreign exchange risks are for the account of the client who have agreed to put in place appropriate hedging should it berequired.
Eligible Obligor Performance Risk:
All Obligors will undergo KYC procedures by SSCTF, including ascertaining and monitoring their ability to pay, their market reputation and their pre-requisites for completing the purchase in a timely manner.
Risk Mitigation (...continued)
Eligible Obligor Security Risk:
SSCTFwill ensure that it has an assignment of receivables or be the named assignee or beneficiary of any Letter ofCredit.
Eligible Credit Support Provider Performance
SSCTF will ensure that it is a named loss payee on any credit insurance policy or the direct beneficiary of any such policy Credit support will only be provided by Eligible Credit Support Providers asdefined in the Prospectus.
SSCTF will ensure that all documents are received in a timely manner from all parties and will maintain a four eyes principle, whereby two directors check all documents. SSCTF will confirm that the contractual terms for the purchase and the sale are substantially identical and Deliverable
Co-mingling of Assets:
SSCTF will ensure that they continually monitor the location and state of the assets in order to minimize the risk of co-mingling.
Other Counterparty Exposures:
KYC checks will be performed on other parties to each transaction as SSCTF are notified of them. This will include inter alia warehouses, shippers, quality inspectors and any other parties who may affect the value or reliability of the security.
Risk Mitigation (...continued)
Other Legal Considerations:
As of the date of this application, no embargoes or sanctions are applicable to these Proposed transactions. Legal documentation has been approved by Watson Farley& William and to the best of our knowledge is both:
(i) Enforceable as against all parties and;
(ii) is in line with market practice.
The countries in which transactions will occur are listed in this application. SSCT will continually monitor the geopolitical and regulatory landscape to ensure that risks remain acceptable.
Pipeline as of today
|Commodity||Finance Type||Facility||Avg Transaction Utilisation Tenor||Interest Rate p.a.||Underlying Risk||Risk Mitigation|
|Wheat||*Port Warehousing financing against inspection & FCR|
*FOB Sale on CAD to reputable buyer
|USD 10,000,000||USD 2,750,000||85%||45||11.00%||CAD payment from a reputable buyer||Documentary transaction through top-tier bank , original title is released only upon payment. Payment against copies of documents|
|Soya||*Warehouse financing against inspection & FCR|
*CFR Sale on L/C basis
|USD 8,000,000||USD 1,750,000||90%||45||10.50%||Incoming LC from approved Dubai based bank||LC at sight from the bank|
|Barley||*BL financing||USD 7,500,000||USD 3,750,000||90%||60||9.75%||Incoming LC from first-tier Swiss bank||LC Confirmation by Borrower's bank|
Pipeline as of today
Sample Transactions (continued)
|Sunflower Oil||*Warehouse financing against inspection & FCR|
|USD 7,500,000||USD 2,340,000||85%||50||11.00%||100% CAD payment against copies of documents||Contract with investment grade buyer plus performance bond. Original title and documents are not released to the buyer untill payment is received|
|Sunflower Meal||*Warehouse financing against|
inspection & FCR
|USD 8,000,000||USD 2,750,000||80%||60||11.25%||CAD payment from a reputable buyer||Documentary transaction through top-tier bank , original title is released only upon payment. Payment against copies of documents. Credit Insurance is in place.|
|Rape Seed||*Warehouse financing against inspection & FCR|
|USD 6,000,000||USD 2,450,000||85%||55||10.25%||LC from approved Czech Bank||LC Confirmation by Borrower's Bank and assignment of proceeds|
Pipeline as of today
Sample Transactions (continued)
|Rape Seed Oil||*Warehouse financing against inspection & FCR|
|USD 6,000,000||USD 2,700,000||85%||60||9.75%||Contract with recognized Switzerland based Commodities Trader||Credit Insurance from Pre-approved Insurance Companies|
|USD 5,000,000||USD 1,250,000||80%||40||12.00%||Incoming L/C at sight from reputable German Bank||Confirmation of L/C by borrower's bank|
|Fertilizer||*Warehouse financing against||USD||USD 3,500,000||90%||60||10.25%||CAD payment from investment||Credit Insurance, assignment of proceeds|
|FCR||8,500,000||grade buyer||and joint account with the borrower|
|*CIF sale on CAD|
List of Eligible Credit Support Providers
|ABN AMRO BankN.V.||Industrial & CommercialBank of China Limited|
|Abu Dhabi Commercial Bank PJSC||Industrial Bank of Korea|
|Agricultural Bank of China Limited||ING Bank N.V.|
|Australia and New Zealand Banking GroupLimited||JP Morgan Chase Bank N.A.|
|Atradius Credit Insurance N.V.||Korea Development Bank|
|Bank of China Limited||Lloyds Bank Plc|
|Bank of Communications Co., Ltd||Lloyds of London Insurance Syndicates|
|Bank of Nova Scotia||Malayan Banking Berhad|
|Banque Cantonale Vaudoise||National Australia Bank Limited|
|Barclays Bank Plc||National Bank of Abu Dhabi PJSC|
|Bayerische Landesbank (Bayern LB)||National Bank of Kuwait S.A.K.P.|
|BNP Paribas||Norddeutsche Landesbank Girozentrale|
|China Construction Bank||Oversea-Chinese Banking Corporation Limited|
|Citibank N.A.||Qatar National Bank S.A.Q.|
|Coface S.A.||Royal Bank of Canada|
|Coöperatieve Rabobank U.A.||Santander UK plc|
|Crédit Agricole S.A.||Skandinaviska Enskilda Banken AB|
|Credit Suisse AG||Société Générale S.A.|
|CTBC Bank Co., Ltd.||Standard Chartered Bank|
|DBS Bank Ltd||The Toronto-Dominion Bank|
|Euler Hermes S.A.||UBS AG|
|Export-Import Bank of Korea||Unicredit Bank Austria AG|
|Garant Versicherungs AG||United Overseas Bank Limited|
|Hang Seng Bank Limited||Wells Fargo Bank N.A.|
|HSBC Bank Plc|
Spyros Papadopoulos has over 18 years’ experience in alternative investments. He began his career in Private Banking, first with Citigroup in London and Geneva, where he was the key contributor to the development of both the Spanish and Greek Wealth Management Desks, and then with Société Générale in Athens, where he was instrumental to the expansion of the Greek Private Banking division. Spyros resigned from Private Banking in 2006 to set up an asset management company for Deloitte, before returning to London as Director of the hedge fund Absolute Return Partners. He left to found Synthesis in June 2009. His clients came through unscathed, and indeed profited, from the crises of 2000-02 and 2008. Spyros holds the Investment Management Certificate of the CFA-Society of the UK.
Ilya Medvedenko is responsible for business development , transaction origination and monitoring of CIS-based client relationships. Ilya has expertise in corporate development, international trade, corporate financing, credit and equity investments in soft commodities and real estate. Previously he has worked at Investment Banking Division of JP Morgan in London-based European Financial Institutions Group. Earlier Ilya was responsible for trade financing and European business development in Barens Chocolate LLC. Ilya holds MSc in Finance & Investment, M&A, Private Equity degree from London School of Business and Finance.
Matthew Edwards has over 27 years’ experience in financial services. He began his career with Tullet and Tokyo in the city of London in 1990 where he quickly established himself as a leading broker. Matthew worked for two other leading brokerage houses in London before moving to Athens in 1997. He was head of all foreign exchange activities for Sigma money brokers who under his guidance became the global benchmark for GRD brokerage. He has since acted as a business development consultant for ICAP London, BGC Partners and Cleaves Securities. Throughout his career Matthew has developed and managed key client relationships and maintains strong relationships with banks, brokerages and private equity firms
With more than 15 years broad experience in the legal and financial sectors, Joseph is an experienced management professional, having grown, re-organised and co-ordinated a number of funds, businesses, teams and departments, with full P&L responsibility and an excellent track record. A key element of his work has been doing business face to face internationally, having undertaken business trips across five continents to more than 50 countries, and with clients in more than 150. In 2015, he founded Old Park Lane Consultancy Ltd, through which he consults on fund structuring, capital raising, product development, international business and communications for a number of clients.
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