Trade Finance TV on Location at TXF Global Commodity Finance Amsterdam 2019

Where did copper production finance, base oil exports, and structuring techniques all come together in two days?  Find out in these edited highlights from speakers and delegates at TXF Amsterdam held 23 to 24 May 2019.

First into the studio was KME’s Chief Financial Officer Pierpaolo di Fabio and Deutsche Bank’s Director of Structured Commodity Trade Finance, Sven de Zoeten, reminiscing about the commodities supercycle – and the need for a different approach to funding working capital.

Following on was the International Trade & Forfaiting Association’s Sean Edwards and André Casterman on the originate to distribute model and how to make trade finance assets attractive to investors.

With oil as something of a bellwether in commodities, it was good to hear from Deutsche Bank’s Director of Structured Commodity Finance Yann Ropers and EMEA Regional Head of Distribution Boris Jaquet about the appetite for reserve-based lending oil borrowing from new E&P companies based in the North Sea.

Turning to the smaller corporates, Amsterdam Trade Bank CEO Harris Antoniou and London Wall Risk Management’s Colin Heritage then shared their thoughts about SME access to commodity finance.

Three “musketeers” of commodity and structured commodity finance who could count more than a century’s experience between them stepped up into the studio and agreed that trade gets paid if you play the structuring cards right – listen up to Deutsche Bank’s Vice Chairman of Trade Finance Commodities – the full version has additional input from Sullivan & Worcester partner Geoff Wynne and former HSBC guru turned consultant Jean-François Lambert.

Given that Amsterdam is something of a commodities epicenter,  we then welcomed two Dutchmen: Deutsche Bank’s Head of Structured Commodity Trade Finance Sander Stuijt and Assistant Vice President Structured Commodity Trade Finance Tim de Lange to talk about what has changed and what has endured across generations in the market.

With Shandong Qingyuan Group collecting a TXF’s Best Overall Commodities Finance Deal of the Year, Trade Finance TV had great pleasure in welcoming Ma Zhi Qing, the Zibo-based founder onto the programme, with Deutsche Bank’s Head of Structured Commodity Trade Finance Asia Pacific, Frank Wu, not only in his capacity as financier, but as our Mandarin translater.  Ma and Wu explain how the change in government policy around the granting of import licences and foreign debt regulations has helped what started as an idea formulated behind the wheel of a tractor three decades ago into the rapid development of this remarkable lubricant corporate.

On 1 April 2019, Sandra Hack took over the Global Head of Structured Commodity Trade Finance baton from John (Mac) MacNamara, who set up the original desk in 1999. Are these very big shoes to fill? Hack tells Trade Finance TV how she is making her own way in this very exciting new role.

Talk of digitalising trade finance continues, but who is actually making it happen?  CEO Souleïma Baddi (ex Societe Generale) is joined by Citibank’s Global Head of Commodity Trade Finance Kris Van Broekhoven and they explain who this new blockchain-based platform backed by some of the world’s largest banks and traders is doing this in commodities.

The other part of the digital journey is, of course the messaging, and it was good to hear from SWIFT’s Head of Trade & Supply Chain Huny Garg, and Senior Product Manager Bridget Cosgrave about how SWIFT is supporting banks and corporates with trade payments. Having heard about the commodities, the deals, and innovation at TXF Amsterdam, we closed with a reminder from Reed Smith partner Robert Parson about the risk of trade finance fraud and what the industry is doing about it. Table 7

Transcript of interview:

Clarissa Dann Good morning and welcome to Trade Finance TV on location here in lovely Amsterdam, the epicenter of global commodities. I’m Clarissa Dann, your presenter.

We have two packed days of commodities, their ups and their downs, regulation and the technology that moves them all around the world.

Let’s come on to how we’re financing it. You’ve been using structured commodity trade finance as a facility for as long as I can remember. Why do you like it so much? Why does it work so well for your business?

Pierpaolo di Fabio I mean, for KME it made a lot of sense. I just came in 2006, so it’s almost now in 15 years when I’m getting old and and when I was coming from another industry, even then we’re involved with with the commodity. But we’re not, let’s say, financed traditionally. I found it was good that it was still financing traditionally with corporate finance, because, of course, metal prices where until 2003, 2004, really low. And basically commodity financing was not really seen as a necessity, because it was just the normal way of financing the company. You can borrow normally, let’s say, with the corporate loan and say unsecured debt, because, of course, your ABDA was much, much bigger than your financing need. The leverage was low. With super cycle of commodities everything changed. 

Sven de Zoeten That’s when we met.

André Casterman Going forward, I think on the originator side, the goal is to move and some have achieved it already, to move to an originate-and-distribute model, so that this whole end-to-end process doesn’t stop on the balance sheet of the originator, but can proceed to bring those assets to capital markets investors or other types of funders.

Sean Edwards Now, we need, specifically, we’re all about the secondary market and very much about distributing trade. You can’t divorce distribution from origination and the two should have a mutually beneficial relationship with each other.

Yann Ropers Oil is a volatile commodity. It’s very linked to macroeconomic factors and also geopolitical issues. So, you know, I mean, what matters more for me as a banker is how we manage this volatility.

Boris Jaquet We see a lot of deals where there’s lots of fights to get at a different level and there’s not enough seats. So there is a strong appetite for these kind of assets.

Harris Antoniou Larger banks tend to actually focus on much larger clients.

Colin Heritage What we’re finding is it takes a while sometimes to understand what different banks are looking for in terms of their focus, in terms of exactly the product range, the commodities they’re interested in supporting, sometimes what is the level of equity in the business they might be seeking, the types of transactions, the type of commodities and the jurisdictions that they want to support.

John MacNamara People forget structuring is not a science, it’s an art, but it’s it’s a bit like cards. The structure gives you certain cards, but it’s also important how you play them, and it only really works if it’s properly installed, correctly maintained, but also that you play those cards correctly when the time comes and you have seen restructurings where some banks recover in full and others don’t.

Sander Stuijt I think what has changed, though, when my generation started, it was the lending part of the banks transaction banking, and that was considered the second hand citizens. The cool people went into corporate finance and investment banking. And the funny thing that you see now, actually also in our bank, is we receive a lot of people from the investment bank, because this is now seen as the more sexier and more of a growth area. But that’s my perception. I don’t know what you think.

Tim de Lange Yeah, I think you’re right. I think a lot of people I speak to, do think that lending is becoming more important there. And especially if you look at commodities, it is a very interesting business and there’s different dynamics to it, which I think attracts people as well.

Frank Wu (translating for Mr. Ma Zhi Qing) The development of Qingyuan and the finding of the Qingyuan group is all thanks to the open door policy of China.

Sandra Hack I really like this new job with all its challenges in the first days, it felt really like jumping into the open sea and not seeing any ground, but with the help of the great teams and with the colleagues, Mac(Namara) is really great in handing over very professionally. And I really liked the first two months and I look forward to the next 20 years, I hope.

Clarissa Dann What are the pain points? Just remind us of where you get frustrated, is it at the ports? Is it further down the transaction trail or is it all the way along?

Souleima Baddi I think it is all the way along. I mean, it’s paper flowing everywhere. As a banker, you finance a transaction against documents, but you never know if the documents are the original ones, are the real ones or if they’re fake. So there’s a lot of operation inefficiencies in the industry, we all know that. What else can you mention?

Kris Van Broekhoven In general, I think just the technology that we have today, this allows us to kind of really look at our processes again and see if we can make it much smoother for the back offices on the corporate side and on the bank side. We all use our smartphones, so we can’t live without them anymore, so I think it’s time that we bring that kind of user experience into our world.

Huny Garg So now we have about 50 countries which are using SWIFT, specifically from a trade perspective, and that has been quite a journey in the last couple of years.

Clarissa Dann And you’ve just joined SWIFT, haven’t you Bridget? What are your impressions?

Bridget Cosgrave So the beauty of SWIFT is that we have this remarkable trust with the community and that gives us a legitimacy and it gives both the corporates and the banks comfort that when they’re using the SWIFT messaging platform, and they’re using our dedicated trade messages, the MT7 series for the banks, and MT 798 for the corporates, they can rest assured that they will get the message through to their counterparty and it will alleviate many of these operational risks.

Robert Parson The Wolfsberg Group is a group of 13 banks, including Deutsche Bank, who have really set the scene in terms of putting out the principles that people should apply in terms of a risk-based approach to combating illicit financial flows.

They’ve updated a previous set of prints, partly to deal with really that  the pace at which financial crime overtakes the measures that are put in place by law enforcement, so it’s not really just a case of the law enforcement agencies looking at this, but banks of all shapes and sizes have got their part to play. And there’s some very simple techniques that criminals use to extract money from the financial system, and some of the figures involved are pretty frightening.

Clarissa Dann I’m Clarissa Dann, your presenter here in lovely Amsterdam, the epicenter of global commodities, as they move all around the world.

We’re here on the second day of TXF Commodity Finance, and we’ve heard about the regulation and the technology and the volatility, bringing together producers and traders from all around the world.

Thank you so much for watching.

Published on June 6, 2019

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