A 4-day comprehensive and practical skills based approach to structured trade and commodity finance.
On completion of the course you will gain:
- A comprehensive coverage of the structured approach to trade finance.
- A focus on considerations relating to emerging market-trade finance.
- A view of risk and commercial priorities from the perspective of a borrower as well as that of a lender.
- Understanding of the importance of documents of title and underlying transportation arrangements.
- Appreciation for the role of insurance products in risk mitigation.
- A view of the application of exchange-traded instruments for price risk management.
- A global view of structured trade finance practices in the commodities space.
Who should attend
Designed for all those who wish to learn how to analyse and structure trade and commodity finance in-depth. We highly recommend the following market professionals attend:
- Trade Finance and Treasury professionals.
- Commercial and Merchant Bankers.
- International Traders.
- Risk Managers.
Course Objective
This course is designed to appeal to professionals interested in risk management and financing of physical flows of commodities. The course will be delivered at an intermediate level. Participants are expected to be knowledgeable about trade finance products, letters of credit and international trading practices. Coverage will tilt towards financing of emerging markets business. Case studies and real-life illustrations will be used frequently to emphasise learning points.
Day 1
Emerging markets
Risks in international trade as they apply to emerging markets
- Political risk.
- Performance and operational risks.
- Credit and bank risks.
- Price risk.
- Illegality of contracts.
- Documents of title.
Case studies: set in China, Indonesia, USA and Eastern Europe.
Financing trade in challenging markets
- Commodity trading – markets and players.
- Evolution of the trader’s business model.
- Structured trade finance and the value chain.
- Risk analysis of a commodity finance transaction.
Case study: real-life illustration of coffee export from Vietnam.
Case study exercise: risk analysis of a pre-finance business proposition set in Africa.
Other considerations
- Implications of Basel Capital Accord.
- Rationale for the ‘structured’ approach to trade finance.
- Characteristics of good collateral.
Day 2
Contracts, structures and documentation
Key documentation considerations
- Transport documents.
- Documents representing goods.
- Title, negotiability and endorsements.
- Documents of Title.
- Incoterms.
- Charter-party contracts.
- Obligations of shipper / charterer and vessel owner.
- Loading and discharge of cargo.
Case study: set in Australia and Latin America.
Risk considerations for pre–finance
- Pre-export.
- Application of Green Clause credits.
- Risks relating to grower / producer finance.
- Valuing producer risk.
- Ownership of the commodity / asset.
- Licenses, export quotas, foreign currency controls.
Case study: real-life illustration of financing a metal smelter in Brazil, CIS.
Risk considerations for pre-finance
- Pre-payment.
- Application of Red Clause credits.
- Limited recourse.
- Absence of obligation to reimburse upon failure to deliver.
- Difference between pre-financing and pre-payment.
Case study exercise: prepayment finance transaction involving a US-based multinational.
Day 3
Structured trade finance applications in warehousing
Warehousing considerations
- What is an asset-backed structure?
- The business case for warehousing
- Problems with pledges over inventory stocks and physical dispossession
- Legal infrastructure required to support warehouse receipt finance
- Is a WH receipt a title document or only evidence of receipt?
Case study: real-life illustration about distribution of corn in Saudi Arabia.
Financing issues with warehousing
- Warehouse receipts finance.
- WRF structures.
- Raising finance against warehouse receiptsbacked securities.
Case study: real-life illustration of wheat and cotton exports from Central Asia.
Collateral management
- Collateral Management Agreement (CMA).
- Liability of collateral managers.
- Negotiating CMA documents.
- CMA components.
- Review of a CM Agreement.
- Mishaps in collateral management arrangements.
Case study: real-life illustration involving sugar cargoes in Benin and Indonesia.
- Tolling finance.
- Performance and country risks.
- Causes leading to non-delivery by processor.
- Security interests of financier.
- Insurance solutions.
Real life case study: financing a processor in UAE.
Day 4
Alternative financing structures and risk mitigation
Examples of Islamic Finance structures for commodity flows
- Types of other financing structures.
- Other financing structures.
- Switch.
- Clearing currencies and escrow account.
- Receivables-backed finance.
Case study exercise: real-life illustration set in China, Russia and a developing country.
Insurance issues
- Principles of marine insurance.
- ICC A/B/C, contingency cover.
- Security over insurances (assignment vs. loss payee).
- Why do banks need political risk insurance cover?
- Contract frustration.
- Confiscation of assets.
- Credit insurance.
- Covering risk of default in payment by buyer.
- Legal traps.
- Breach of warranty.
- Failure to act as if you were uninsured.
Price risks
- Price risk management in commodity trade.
- Price discovery exchange.
- Traded versus OTC.
- Link between cash and futures markets.
- Understanding contracts to hedge.
- Benefits / advantages for the customer and the bank.
Case study exercise: energy / agri products.
Course summary and close
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The Course Director is a Trade Finance practitioner with 32 years experience in the Asia-Pacific region. His experience encompasses both commercial and financial aspects of International Trade. He worked for many years in Bills, Banking Operations and Credit & Marketing Departments of an international bank in Hong Kong.
Since 1991, he has been associated with commodity-trading firms in Singapore as Head of Trade Finance and Risk Management. His expertise relates to structuring financial arrangements for international trade transactions, raising credit lines and managing banking relationships.
He heads a trade finance consultancy in Singapore. His seminars provide clarity over technical concepts and offer participants the opportunity to reinforce their own understanding of the subject through practical illustrations.
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
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