GTR Ventures News

Malaysia leads “blowback” against China’s Belt and Road Initiative

From Global Trade Review (GTR) | By Finbarr Bermingham

Amid mounting debts and fears over China’s perceived expansionary intentions, more and more countries are becoming disgruntled with the much-vaunted Belt and Road Initiative (BRI). Malaysia’s Prime Minister Mahathir Mohamad this week used a state visit to Beijing to announce he was shelving plans for two major infrastructure projects that fall under the BRI umbrella. “I believe China itself does not want to see Malaysia become a bankrupt country,” Mahathir said, referring to Malaysia’s high level of sovereign debt, upon announcing his plans to scrap the projects The previous day, standing alongside Chinese Premier Li Keqiang, the recently returned veteran leader had said: “We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries.” Mahathir has cancelled the East Coast Rail Link and the Trans-Sabah Gas Pipeline projects, which were due to cost US$20bn and US$2.3bn, respectively. In doing so, he has echoed the concerns of many other politicians and analysts about the potential debt trap that the BRI could potentially create, as well as the conditionality that could come as a result of being unable to repay these debts. “I would totally agree that there’s blowback occurring on all fronts regarding China’s state-centric soft power, including BRI. I think there’s pushback on all fronts on China Inc’s ambitions to promote Chinese firms and technology,” Alex Capri, visiting senior fellow at the National University of Singapore’s business school, tells GTR. “On BRI, the debt model that Beijing has been pushing for to emerging countries, it’s increasingly seen as a honeytrap that has backfired,” he adds. The situation is laid bare in a recent study by the Centre for Global Development (CGD), a US think tank. Researchers evaluated the current and future debt levels of the 68 BRI countries, finding that 23 of those are at risk of debt distress today. The study found that for eight of those countries, future BRI-related financing will significantly add to the risk of debt distress. These countries are: Pakistan, Djibouti, Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan. The situation in Pakistan has come under intense scrutiny following the election of new Prime Minister Imran Khan. Pakistan is rated by the CGD as “by far the largest country at high risk”, with US$62bn in additional infrastructure debt, 80% of which is owed to China through big ticket BRI projects. While Khan is set to review some of China’s energy and infrastructure investments, the early signs are that he will maintain close economic ties with Beijing. In Sri Lanka, anti-China investment sentiment predates BRI itself. The country was the recipient of a series of high interest Chinese loans which helped build highways, a cricket stadium, a deep-water port and the massively under-utilised Mattala Rajapaksa International Airport, which has a capacity for one million passengers a year, but which sees only a dozen passengers every day. “Some countries are growing increasingly wary about the financing structures associated with Chinese infrastructure investments. There are worries about potentially high levels of debt. In cases of debt-for-equity deals – as with the Hambantota port in Sri Lanka, for example – critics raise concerns about political leverage and territorial integrity,” Joydeep Sen, South Asia analyst at Oxford Analytica tells GTR. Tonga’s Prime Minister Akilisi Pohiva, meanwhile, last week said that Pacific island nations should lobby China to forgive the debts owed to it for infrastructure projects. The country is reportedly US$160mn in debt to China, including a 2007 loan from China Exim to rebuild the capital city Nukualofa following a spate of rioting. “One issue for certain is that we don’t want the Chinese government to take the assets used as collateral for the loan, and when we don’t request for loans, we will not be aligned with the developments of the world it is today,” Pohiva told the Samoa Observer. Even while the pushback gathers pace, however, enthusiasm for BRI remains strong among the banking sector. In a recent glowing report on the BRI, German bank Commerzbank wrote: “Despite these challenges, Commerzbank is confident that, for BRI countries and companies – including those from Europe – as projects increase, so will the opportunities, trust, expectations and rewards.” Citi, meanwhile, has just appointed a head of banking and origination in Hong Kong, dealing exclusively with BRI-related work. The post Malaysia leads “blowback” against China’s Belt and Road Initiative appeared first on Global Trade Review (GTR).

Lenders flock to huge Peruvian project financing

From Global Trade Review (GTR) | By Finbarr Bermingham

mina justa Peruvian miner Minsur has secured US$900mn in project financing for its Mina Justa copper mine. The lenders come from across the world, with over a dozen commercial and development banks joining a group of export credit agencies (ECAs) from countries with strong mining industries. The lenders are: BBVA Continental, BBVA, Banco de Crédito del Perú, Crédit Agricole, Export Development Canada (EDC), Export Finance and Insurance Corporation (EFIC, the Australian ECA), ING, KfW Ipex-Bank, Natixis, SG Americas Securities, Société Générale and the Export Import Bank of Korea (Kexim). Law firm Sullivan and Cromwell represented the borrower, Marcobre SAC, a subsidiary of Minsur, one of the world’s largest tin miners. Mina Justa is set to produce 100,000 tonnes of copper a year when it comes online in 2020. Total project cost is expected to run to US$1.77bn, with Minsur providing the rest of the capital. The mine will be located in the district of Marcona, which is in the Nazca province, in the Ica region of Peru. The deal represents the first greenfield mine project financing to sign in Latin America this year, according to Sullivan and Cromwell. It comes just months after Minsur sold a 40% stake in the project to Alxar Internacional, a subsidiary of Chilean company Empresas Copec, for US$200mn. Kexim, the Korean ECA, is to finance US$200mn of the debt from its own book, with Korean-Japanese consortium LS-Nikko Copper purchasing 30% of the copper output for the next 10 years. Kexim has been growing its presence in Latin America in recent years in a bid to solidify South Korea’s supply of raw minerals. In 2015, it signed onlending deals worth US$3.2bn with five banks in Brazil, Chile and Peru. This followed a state visit by former Korean president Park Geun-hye in the same year, which saw a range of investment deals signed. The most high-profile deal was a US$13bn agreement between the Peruvian energy ministry and Kexim to collaborate on a petrochemical complex. The post Lenders flock to huge Peruvian project financing appeared first on Global Trade Review (GTR).

German development bank KfW supports Indian renewables

From Global Trade Review (GTR) | By Finbarr Bermingham

kfw KfW Ipex-Bank, a German development bank, has loaned €200mn to support renewable energy production in India. The borrower is Rural Electrification Corporate (REC), a government agency that will onlend the finance in the form of low-interest loans, to investors in the solar and wind power sectors. Borrowers must contribute 30% in equity to any project supported by the REC scheme, while it is also hoped that other banks can join financings through syndication. It fits in with the Indian government’s plans to produce 175GW of renewable energy by 2022. This would represent around 50% of total energy generation. 100GW would come from photovoltaic energy under this plan, with a further 60GW coming in the form of wind energy. The rest would come from smaller sources, such as biomass and small-scale hydropower. This KfW Ipex package will see enough power generated to support 270,000 Indian homes, offsetting some 285,000 tonnes of carbon emissions each year. It marks the fourth line of credit REC has received under the Indo-Germany Development Co-operation, a bilateral initiative designed to support renewable green energy projects in India. KfW Ipex has a history of supporting rural electrification in South Asia. Since 2016, it has provided support for Myanmar’s rural electrification programme, culminating in a financing package in 2017. The post German development bank KfW supports Indian renewables appeared first on Global Trade Review (GTR).

Bank of America bankrolls Texan wind farm

From Global Trade Review (GTR) | By Finbarr Bermingham

engie Engie North America has secured US$320mn for a wind project in Texas. The lender is Bank of America Merrill Lynch, with US$147mn of the funds coming in the form of construction finance, and US$155mn in project finance. Rabobank provided a letter of credit, while BofAML provided a power hedge. The funds will help build the 200MW Live Oak wind farm, part of a renewables portfolio recently purchased by Engie. The farm will come online at the end of the year. The project will use 76 Siemens-Gamesa 2,625MW turbines with 120-metre rotors, and the balance of the facility will be constructed by Blattner Energy. Engie acquired the Live Oak project from Infinity Renewables, which began developing the site in 2009. Senior vice-president and head of US wind development at Engie, Matt Riley, described it at the time as “the strongest wind portfolio in the US”, saying that “Live Oak is just the first of many successes we expect over the coming years”. Upon the announcement of the financing package, Riley said: “We’re pleased to enhance the Live Oak project’s value with a competitive financing package and long-term offtake agreement. We look forward to replicating both elements in our future projects as we grow our large-scale renewable portfolio here in the US.” The post Bank of America bankrolls Texan wind farm appeared first on Global Trade Review (GTR).

Citi creates banking role for Belt and Road Initiative

From Global Trade Review (GTR) | By Finbarr Bermingham

citi Beibei Li is to become Citi’s head of banking and origination for China’s Belt and Road Initiative (BRI), an initiative geared towards constructing infrastructure along the old Silk Road route. She will be based in Hong Kong, reporting to Gerry Keefe, head of corporate banking for Asia Pacific. Li relocates from New York where she is currently managing the Chinese institutional client portfolio in North America. Li has worked at Citi since 1999, initially as a management associate. She has subsequently worked in a number of consumer and corporate banking roles. She begins her new role at the start of September. This will be viewed as an attempt by Citi to capitalise on the expected growth in trade spurred by the BRI. The bank is present in 60 of 70 BRI markets. To date, most of the financing has been done centrally by Chinese policy banks and government lenders. However, Keefe says that Li’s appointment will help position the bank as a funding partner for BRI projects. “The BRI is a strategic imperative for all of our major corporate, public sector, financial institution and global subsidiary clients operating along the Belt and Road – both global and local names. As such we have created a new leadership position to help align the firm’s strategic priorities, connect product and coverage partners, and drive further business opportunities across the BRI economic corridors,” he says in a bank statement. The post Citi creates banking role for Belt and Road Initiative appeared first on Global Trade Review (GTR).

Standard Chartered trade finance banker joins AIG

From Global Trade Review (GTR) | By Sanne Wass

Olga Berlinskaya has left Standard Chartered to join AIG’s supply chain and trade finance team. At Standard Chartered she was an associate director within the capital structuring and distribution group. There she worked with the distribution of financial institution and corporate trade assets into the secondary market, and risk participation in supply chain and receivables finance programmes, covering a European and Sub-Saharan African portfolio of financial institutions and alternative investors. She previously worked at Bank of America Merrill Lynch, HSBC and Olam International. At AIG, Berlinskaya has taken on the role of senior business development and relationship manager. Heading up AIG’s supply chain and trade finance team is Marilyn Blattner-Hoyle, who was promoted to the role last year after Scott Morris moved to Sompo Canopius. With her move, Berlinskaya joins a growing number of trade finance bankers who have left banks and taken the leap into insurance. A relatively recent example is Chris Hall, who moved from Lloyds Banking Group to become a senior underwriter at Liberty Specialty Markets earlier in the year. In 2015, Silja Calac took on an underwriting role in Swiss Re’s credit and surety team, and spoke to GTR recently about changing track almost two decades into her banking career. The post Standard Chartered trade finance banker joins AIG appeared first on Global Trade Review (GTR).

UK’s new export strategy draws mixed response from trade community

From Global Trade Review (GTR) | By Shannon Manders

The UK government’s new and much-anticipated export strategy sets out its ambition to increase exports as a proportion of GDP and to produce “more tailored support” to UK companies. Key elements of this support will be peer-to-peer learning to encourage more businesses to export; the development of the department for international trade (DIT)’s website into a “single digital platform” for practical advice and assistance on exporting; and the creation of an online tool to enable UK businesses to easily connect to overseas buyers, markets and other UK exporters. Response to the new strategy – which was launched today by international trade secretary Liam Fox – has been mixed. The British Exporters Association (BExA) says it is “extremely encouraged” by the new plan and welcomes the “challenging growth targets” that have been set. BExA co-chair Marcus Dolman calls the government’s export target of 35% of GDP “ambitious but achievable”. In 2017, this number was 30%, amounting to £620bn-worth of goods and services exported by British companies. It’s the first time the government has used this measure to quantify its exports. “It’s preferable to a nominal value target as it more accurately reflects changes in the UK’s underlying export performance,” a DIT spokesperson tells GTR. No time frame on the target was provided. According to DIT estimates, as many as 400,000 businesses believe they could export but don’t – and these form the focus of the new strategy. Demand for British expertise and goods overseas, meanwhile, is growing. The strategy’s business-led approach –in which the government intends to work closely with the private sector to drive exports – has been hailed by some market players as crucial. Speaking at the launch, Adam Marshall, director general of the British Chambers of Commerce, said that the right day-to-day support for exporters is “as important as efforts to negotiate new trade deals”. “Trusted, face-to-face support is key to export success. When firms get the information and connections they need to develop new markets and find new customers – that is when we see confidence, investment and results,” he explained. Others are less encouraged by this approach. One source tells GTR that the new strategy is a sign that the government has acknowledged that its lack of communication forms part of its shortcomings and is simply “passing the buck” on to UK companies themselves to engage in peer-to-peer learning. The new strategy stipulates that there will be an “increased focus on amplifying the voice of existing exporters to inspire other businesses and facilitating peer-to-peer learning”. It does not outline how the government will incentivise companies to support their peers in this regard. “It’s not going to work,” says GTR’s source, a former UK banker with close ties to the government, who prefers to remain unnamed. “Most UK companies are lethargic. Those that are proactive and have this knowledge know exactly how much energy, cost and time it’s taken to get hold of that information and keep it up to date. Often this knowledge is gleaned from having in-country capability. They’re not going to give that away for nothing.” The DIT tells GTR that it will be creating a “community of new UK Export Champions” as one way of overcoming this hurdle. “Our consultations with businesses have concluded peer-to-peer is a more sensible way of engaging with business rather than dictation from government,” the spokesperson says. The new strategy – which comes into play immediately and with no fixed deadline – lays the foundation for how the government plans to support businesses in the years ahead. The next phase will see the DIT work across government to review what further measures could help improve its export performance and meet the 35% goal. “We are considering next steps in terms of an implementation plan and its governance, including monitoring and tracking progress against each of the measures,” the spokesperson explains. “It’s a long-term aspiration.” The post UK’s new export strategy draws mixed response from trade community appeared first on Global Trade Review (GTR).

Argentina’s SMEs to get better loan terms with new deal

From Global Trade Review (GTR) | By Shannon Manders

Argentinian SMEs will benefit from a US$55mn loan that the International Finance Corporation (IFC) is providing to private bank Bind Banco Industrial. More than 70% of Argentina’s SMEs have difficulties accessing financing. Through this funding the Bind Banco Industrial will be able to offer SMEs longer-term financing than currently available in the local market. “With IFC’s partnership, we will strengthen our support to SME clients, which represent our main market segment,” says Javier Popowsky, the bank’s CFO. Bind Banco Industrial has a strong focus on SMEs, mainly in the agribusiness, services and manufacturing industries, as well as wholesale trade. It became an IFC client in May 2018 when it joined IFC’s global trade finance programme, which facilitates trade flows through guarantees and includes a network of more than 70 banks in Latin America. “Bind Banco Industrial has a solid track record supporting smaller businesses in Argentina, and with this new funding we want to help the bank extend the tenor of its lending to SMEs,” says David Tinel, IFC regional manager for the Southern Cone. “Longer-term credit is crucial to plan, seek growth and hire new employees.” Over the past 18 months, the IFC has committed approximately US$1.7bn to support sustainable private sector projects in Argentina. The post Argentina’s SMEs to get better loan terms with new deal appeared first on Global Trade Review (GTR).

Mizuho Americas takes on new transaction banking head

From Global Trade Review (GTR) | By Shannon Manders

Jan-Erik Andersen has joined Mizuho as managing director and head of global transaction banking department Americas (GTBDA). He makes the move from Exvere, a Seattle-based mergers and acquisitions advisory firm, where he served as managing partner and COO. He previously held positions at Fifth Third Bank and Standard Chartered. Andersen is based in New York and reports to Takeshi Ohashi, general manager of the global transaction banking department in Singapore. Within GTBDA, Andersen is tasked with leading the group’s expansion of trade and cash management product capabilities. He will also lead the Mizuho Americas’ working capital solutions initiative, to create more multi-product, cross-regional opportunities for clients, a spokesperson for the bank tells GTR. The post Mizuho Americas takes on new transaction banking head appeared first on Global Trade Review (GTR).

PIB TradeRisk Solutions expands team

From Global Trade Review (GTR) | By Shannon Manders

PIB Insurance Brokers has made another appointment to expand its TradeRisk Solutions team, hiring Maria Antonia De Carli as an account executive. The move follows the appointment of Nicola Salmon as an account executive last year. De Carli previously worked within the political risk and structured credit team at Aon and is based in London. Like Salmon, De Carli will have an international remit to provide political risk and structured credit insurance solutions to clients in the SME, corporate, commodity trade, banking and financial institution sectors. Her current focus, De Carli says, is on LatAm markets. “This region has a great potential, and due to its more stable geopolitical and economic scenario, it presents great opportunities for our clients.” Richard Miller, head of TradeRisk Solutions, comments on the hire: “Maria’s geopolitical and economic research and analysis will help our clients trade and compete on the global stage. Maria is well respected by underwriters and her focus on client service and delivery expands our offering and further deepens the expertise of our team.” The team’s main strategy is focusing on development as well as PIB Insurance Brokers’ presence and expansion, says De Carli. “We aim to grow nationally and worldwide and become an international reference for new clients and underwriters.”   The post PIB TradeRisk Solutions expands team appeared first on Global Trade Review (GTR).

BNP Paribas reshuffles Asia transaction banking team

From Global Trade Review (GTR) | By Finbarr Bermingham

French bank BNP Paribas has made a series of senior appointments to its transaction banking team in Asia Pacific. Mahesh Kini (pictured) joins as head of cash management for the region. He moves from Deutsche Bank, where he was most recently head of global transaction banking for China. During his time with the German bank he also held the roles of head of corporate cash management for Greater China and head of cash management for corporates, Asia. Kini joined Deutsche Bank from HSBC in 2007 and has also worked for ABN Amro, Bank of America and HDFC Bank in India. He is based in Singapore and reports to Chye Kin Wee, head of transaction banking for Asia Pacific. Zoran Lozevski is now BNP Paribas’ head of global trade solutions, Asia Pacific, also based in Singapore. He was most recently head of transaction banking for Australia and New Zealand for the bank. He joined BNP Paribas in 2007 from George Weston Foods Group. He is replaced in Australia by Michael Reid, who joins the bank from Citi and is based in Sydney. Louise Zhang has been named head of transaction banking for China, based in Shanghai. She joins from Deutsche Bank, where she spent 11 years, most recently as deputy general manager for the Shanghai branch, and head of cash products for the Greater China region. Zhang previously worked for HSBC in Hong Kong and Shanghai. She reports to Timothy Lee, who is the new head of transaction banking for Greater China. This role is based in Hong Kong. Lee will be responsible for connecting the bank’s China business with the rest of the Asia Pacific region. He has worked for BNP Paribas for five years, and joined from JP Morgan. Lee has also worked for HSBC, Citi and Deutsche Bank. “We are pleased to welcome so many senior hires to our existing, deep pool of talent. Their extensive experience will strengthen our position as a leading transaction banking business in the Asia Pacific region,” says Chye Kin Wee. The post BNP Paribas reshuffles Asia transaction banking team appeared first on Global Trade Review (GTR).

Danish government freezes new guarantees to Turkey over lira crisis

From Global Trade Review (GTR) | By Finbarr Bermingham

Danish export credit agency (ECA) EKF has frozen all new guarantees to Turkey, as concerns about the country’s economic health continue to mount. The Turkish lira has lost more than 45% of its value this year and continued its plunge this week amid a growing geopolitical storm between Turkey and the US. There are widespread fears that other emerging markets will get dragged into the crisis, including South and Southeast Asian nations and parts of Latin America. Commercial lenders across Europe are watching the situation closely, especially those with high levels of exposure to the Turkish economy. “There are some European banks that are exposed to Turkey – BBVA, UniCredit, BNP Paribas – but these are strong, very large banks that may see a negative impact on their profits from their Turkish operating areas, but won’t face fundamental problems,”  IHS Markit’s principal economist Andrew Birch tells GTR. Despite this, BBVA shares plunged 5.7% last Friday, BNP Paribas fell 4.4%, with UniCredit stock losing 6.4%. Turkey accounted for 14% of BBVA’s total profit in the first half of the year, Reuters reports. Development banks such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) are also lenders who have large exposure to Turkey, and both of these could face problems with their outstanding loans in the country, Birch says. Turkey is one of EKF’s largest markets and the ECA regularly funds projects there that use Danish exports. It has financed more than 15 wind projects in Turkey over the past 10 years, including the US$100mn Balabanli windfarm last year, co-funded with UniCredit. Lynge Gørtz Smestad, senior analyst at EKF, tells GTR that the agency is “not that concerned” about that existing debt because “we mainly have bank risk on our books”. “Our assessment is that in the long run, the Turkish financial sector is pretty healthy. It’s well-capitalised and regulated. So I think our counterparties in Turkey are among the best, but of course we’re aware of the situation because it is a big market for EKF,” he says. Should there be a rate hike or other government intervention to stabilise the lira, EKF may reassess the freeze, but Smestad says that EKF and “all the banks around the world” will be watching the situation carefully. There are huge concerns about Turkey’s domestic banking sector too. The likely loss of foreign investment inflows is likely to undermine its banks’ trade, project and export finance businesses. “In the first quarter of 2018, Turkish banks had outstanding foreign liabilities equivalent to 23% of total funding, or 230% of official foreign exchange reserves,” Birch says. Turkish banks regularly tap international debt markets as a means of funding their trade lending. Indeed, annual refinancings of Turkish bank debt are viewed as calendar events and attract lenders from around the world. In March, for instance, Akbank refinanced US$1.2bn-worth of debt with 39 banks from around the world. “Despite the domestic volatility, the facilities achieved a strong global response with the participation of 38 international banks across North America, Western Europe, Asia and the Middle East which is a testament to Akbank’s strong fundamentals and successes through volatile markets, as well as the resilience of the Turkish financial sector,” reads a bank statement accompanying the refinancing announcement. In May, meanwhile, Yapi Kredi refinanced US$1.5bn-worth of debt, with 48 banks from 19 countries joining the syndicate, and eight new lenders this year. It’s been reported that some domestic banks are selling their project finance loans to lenders from the US and China in a bid to free up their balance sheet for domestic lending, on the request of the Turkish government. For now, the unrest in the Turkish economy shows no sign of abating. Today (August 15) the Turkish government announced that it was raising tariffs on US imports including cars (120%), alcohol (140%) and tobacco (60%). Turkish President Recep Tayyip Erdogan has encouraged Turkish people to boycott US electrical goods, including iPhones, and to replace them with Turkish-made products. He has accused US President Donald Trump of “economic warfare” over the US’ punitive tariffs on Turkish metals. Trump doubled tariffs on Turkish aluminium and steel last week after Turkey refused to release US citizen Andrew Brunson, a pastor who has been held in Turkey since 2016. The US has also sanctioned Turkish government officials in a bid to force the release of Brunson, who was arrested on charges of high espionage. The post Danish government freezes new guarantees to Turkey over lira crisis appeared first on Global Trade Review (GTR).

Wells Fargo funds two US solar projects

From Global Trade Review (GTR) | By Finbarr Bermingham

wells fargo Wells Fargo has completed financing packages for two solar power generation facilities in the US. The first is a US$85mn project financing deal for a large solar project near Fresno in California. The borrower is Sempra Renewables and the funds will help build a 200MW facility in the north of the state, comprising four solar farms, with four separate offtake agreements. The Sempra Great Valley solar project, as the facility is known, will begin operating commercially in May 2019 and will produce enough electricity to power 90,000 homes. The four offtake agreements in place are with Marin Clean Energy (100MW), Sacramento Municipal Utility District (60MW), Pacific Gas & Electric (20MW) and Southern California Edison (20MW). In Florida, meanwhile, the bank has committed US$35mn to the FL Solar 5 project in Orange County. The borrower in this case is Origis Energy, a Miami-based solar energy company. The project will complete by December 2018 and will transmit electricity to Reedy Creek Improvement District of Orange, the offtaker. Both projects are in line with Wells Fargo’s commitment to invest US$200bn in sustainability by 2030, announced in April this year. The plan states that 50% will go into renewable energy, clean technologies, sustainable transport and green bonds. This follows on from a previous goal, set in 2012, of investing US$30bn in clean technologies by 2020. A host of commercial banks have made similar commitments in the wake of the Paris Agreement on Climate Change, which was signed in 2015 and which aims to keep the global temperature to below 2 degrees Celsius. Speaking upon signing the Florida deal, Wells Fargo’s head of independent power and infrastructure, Alok Garg, says Origis Energy is at “the forefront of creating a greener energy future. He adds: “Wells Fargo is proud to be a part of impactful projects like FL Solar 5 that help our communities accelerate the transition to a lower carbon economy.” The post Wells Fargo funds two US solar projects appeared first on Global Trade Review (GTR).

DBS rejigs Wilmar loan in Asia’s latest sustainability-linked loan

From Global Trade Review (GTR) | By Finbarr Bermingham

wilmar Agricultural commodity giant Wilmar has renegotiated an existing revolving credit facility (RCF) with lender DBS, so that the terms may be reduced if it hits sustainability targets. Wilmar will now pay less interest on its two-year US$100mn facility if it reaches performance indicators on a range of issues, from biodiversity to greenhouse gas reduction and renewable energy. This is the latest sustainability-linked loan in Asia, following similar agreements reached this year. The market is nascent, but DBS says it has fielded enquiries on such facilities from both Asian and global commodity players. “We welcome clients to discuss the possibility with us, and we also reach out to clients committed to the sustainability agenda to consider different green financial products, such as green loans, green bonds and ESG (environmental, social, governance)-linked loans,” Yulanda Chung, DBS’ head of sustainability, tells GTR. She refused to say how much of a pipeline there is for this type of funding, but said that “it should not be used as a greenwashing attempt”. The bank will only consider working with companies that have “ambitious yet achievable targets” pertaining to ESG. Further details on the loan’s terms have not been disclosed, but the pre-set performance indicators have been established by Sustainalytics, a Dutch company which has been involved in a series of sustainability-linked loans over the past year. In November 2017, ING restructured a portion of a US$150mn loan to Wilmar. Again, this will see the company benefit from more favourable terms should it hit ESG targets. Wilmar was involved with DBS’ Singaporean rival OCBC in June this year on a US$200mn sustainability-linked RCF, also assessed annually by Sustainalytics. Asia’s first sustainability-linked club loan was closed in March, which DBS was also involved in. Olam was the borrower on this occasion, with 15 lenders contributing equal parts to a US$500mn facility. Further deals are expected before the end of 2018, although most involved in the sector are keen to impress the very early stages at which the market is currently stood. The post DBS rejigs Wilmar loan in Asia’s latest sustainability-linked loan appeared first on Global Trade Review (GTR).

Standard Chartered creates metals and mining head role

From Global Trade Review (GTR) | By Shannon Manders

Standard-Chartered_logo_on-the-move Richard Horrocks-Taylor has been named global head of metals and mining at Standard Chartered – a new role for the bank. He is based in London and reports to Ananth Venkat, global head of global industries group. An experienced industry banker with over 20 years covering the mining sector, Horrocks-Taylor has a record of working with mining clients across the emerging markets. He was most recently with the Royal Bank of Canada (RBC), where he headed the bank’s European, African and former Soviet Union metals and mining business from 2008. Prior to RBC, he worked for other banks, including JP Morgan and Flemings in London, Johannesburg and Hong Kong. Commenting on the hire, Venkat says: “The appointment of Richard into this role will ensure that we continue to keep a granular focus on this [metals and mining] sector and build further depth to support the future growth aspirations of our clients.” The post Standard Chartered creates metals and mining head role appeared first on Global Trade Review (GTR).

Industry rejects Fitch’s call to reclassify supply chain finance as debt

From Global Trade Review (GTR) | By Eleanor Wragg

A recent report by Fitch Ratings in the wake of UK construction firm Carillion’s collapse has sounded the alarm over supply chain finance (SCF) programmes, calling for the extension of payment terms due to reverse factoring to be classified as debt. The ratings agency says that reverse factoring was a key contributor to the largest construction bankruptcy in UK corporate history, as it “allowed the outsourcer to show an estimated £400-£500mn of debt to financial institutions as ‘other payables’ compared to reported net debt of £219mn”. Calling this an “accounting loophole”, the report suggests that supply chain finance programmes could be used to enable corporate buyers to operate with a lack of transparency in their finances – an implication which is roundly rejected by industry participants. “This is very standard practice,” Geoffrey Wynne, partner at Sullivan & Worcester UK tells GTR. His firm is currently working on a transaction whereby the bank is allowing the buyer to negotiate for 360-day payment terms. “If there were any suggestion that they were helping mislead investors, they would be really appalled. The simple answer is that this is a financing device for extending trade payables.” To ascertain the scale of the practice and whether an increase in reverse factoring is occurring, Fitch analysed historic payables days from 2004 to 2017, finding that median payables days were highest in 2017, rising 14 days since 2014. Fitch calculated that this suggests an overall increase in payables of US$327bn. “As seen in the case of Carillion, reverse factoring could have a potentially large impact on vulnerability to default for specific issuers,” Fitch said, adding that it will adjust credit metrics to classify any extension of payment terms due to reverse factoring as debt. One of the main benefits of SCF is that the financing structure is not treated as debt for balance sheet purposes, but as a trade payable which isn’t considered leverage. Such a reclassification would defeat the purpose of these kinds of arrangements for many corporate users. “SCF is different to bank debt,” points out Omar Al-Ali, partner at Simmons & Simmons. “The problem with debt is you essentially have a very large liquidity issue on a specific day when you need to repay, say, US$100mn. In SCF, you need to pay smaller amounts on spread-out days, which is less likely to give rise to liquidity issues. That is an important difference between the two.” If the view on SCF does change, it is likely that economic thresholds will be adjusted to reflect the new reality because the liabilities have always been there, and banks are comfortable with them. This is not the first time a ratings agency has called out supply chain finance. In late 2015, Moody’s Investors Service said that Spanish environment and energy group Abengoa’s large-scale reverse factoring programme had “debt-like” features, and announced a review of its rating methodology. The International Trade and Forfaiting Association (ITFA) successfully challenged that review, asserting that payables finance is a legitimate and acceptable form of finance which should not automatically result in trade debt being re-categorised as financial debt. “ITFA had a very good dialogue with Moody’s. It looks like we’re going to have to start the dialogue with Fitch,” says Sean Edwards, chairman of ITFA. “There has been an increase in days payable, because it is very widespread. But, does that mean that it should be treated as bank debt? I don’t think so. In abnormal cases, like possibly Carillion and Abengoa, they had additional features. In the case of Carillion, it dwarfed their other lines of finance.” For Fitch, the problem is one of disclosure. “An annual report should give you a fair picture without you having to guess. If you look hard enough, you can find clues that this is happening, but there is a distinction between being able to find clues and something being clearly disclosed,” Frederic Gits, managing director, corporate ratings Emea at Fitch and co-author of the report, tells GTR. “In itself, supply chain finance is a perfectly legitimate funding technique. The issue is that because disclosure around it is weak, it can leave a door open for companies to use it in a less appropriate way, for example to hide a debt increase in trade payables.” While those in the industry reject the charge that corporates are widely using SCF to hide debt, ratings agencies say that they have no way of knowing for sure unless there are stronger disclosures around SCF programmes, in order for investors to make better-informed decisions about whether they want to treat them as debt or not. The post Industry rejects Fitch’s call to reclassify supply chain finance as debt appeared first on Global Trade Review (GTR).

Deutsche Bank appoints new Vietnam country head

From Global Trade Review (GTR) | By Finbarr Bermingham

deutsche bank Hans-Dieter Holtzmann has been named chief country officer and head of global transaction banking for Deutsche Bank, Vietnam. Holtzmann has been with Deutsche Bank for more than 20 years, most recently as head of public sector for Germany. In this role he covered federal, state and municipal-level clients. Before this, he was an economic advisor to former German chancellor Helmut Kohl. He now reports to Werner Steinemueller, Asia Pacific head of Deutsche and Kaushik Shaparia, head of global subsidiary coverage for foreign exchange and corporate cash management in Asia. The bank has been in Vietnam since 1992 and employs 70 staff. Holtzmann will be responsible for leading and growing Deutsche Bank’s business there, including “cash management, trade finance and securities services, servicing both global and local clients”, Shaparia says. Steinemueller adds that Vietnam is “one of our key markets in Southeast Asia” and that “last year we significantly increased our capital base in this market”. “Our Vietnam franchise has shown profitable growth and we are excited about the country’s outlook,” he says. The last few years have been a period of relative flux for Deutsche Bank’s Asia transaction banking business. In November 2017, the bank lost Lisa Robins as head of global transaction banking for Asia Pacific. Robins joined Standard Chartered in a similar role two months later. In July of that year, Shivkumar Seerapu left his role as regional head of transaction banking fro the region, to join Lloyds Bank. He was replaced by Atul Jain in a newly-created role, head of trade finance and trade flow, Asia Pacific, reporting to global head of trade finance, Daniel Schmand. The post Deutsche Bank appoints new Vietnam country head appeared first on Global Trade Review (GTR).

UK could move towards US-style sanctions regime after Brexit

From Global Trade Review (GTR) | By Shannon Manders

The UK government will have the power to impose sanctions independently of the international community after Brexit. That’s as a result of a new law, the Sanctions and Anti-Money Laundering Act 2018, which received royal assent in May, and will come into force when the UK officially leaves the EU next year. In the short term there may be little substantive divergence from the existing regime – under which the UK has to follow the EU. But the act “sets the stage for possible variance once the UK starts to establish a clearer political path in the world as it sets out on its own”, says Charles Enderby Smith, associate at law firm Carter-Ruck. The UK government could decide to replicate sanctions coming out of the EU or it could choose to mirror the US’ approach towards sanctions, which would not be an unsurprising move, he tells GTR. This may result in a widening of the application of sanctions to include whole geographical areas, groups of people and may even bring about the implementation of so-called secondary (extraterritorial) sanctions – the likes of which the US has just reimposed on Iran. Regardless of the direction the government takes when moulding its newly-autonomous sanctions programme, institutions “must be alive to a new layer of compliance”, Enderby Smith says. In an interview with GTR, he explains the most important features behind the new legislation, and what that tells us about the powers that the UK seeks as it prepares for its new independence.   GTR: Why is the Sanctions and Anti-Money Laundering Act required? Enderby Smith: With Brexit set for March 2019, the UK is preparing the framework for its future independent sanctions programme, which may in time evolve in a direction at variance from the European Union’s existing sanctions regime. The act will come into force on March 29, 2019, the day the UK formally leaves the EU. The UK currently implements sanctions in accordance with its international obligations. These include:
  • European Union sanctions, which are given direct effect in the UK by virtue of the European Communities Act 1972; and
  • UN sanctions (to the extent these are not already reflected through EU sanctions), which are effected through domestic legislation.
There are also narrowly defined circumstances in which the UK implements its own sanctions, including combatting international terrorism. While the UK will continue to be required to implement UN sanctions through domestic legislation, Brexit will put paid to the automatic implementation of EU sanctions, leaving a potential gap in the UK’s sanctions programme. It is this lacuna that the act seeks to address, while also opening the door for the UK to develop its own autonomous programme once it is no longer subject to the EU’s common foreign and security policy.   GTR: To what extent does the act extend the government’s powers, and what does this tell us about the powers the UK government seeks in preparation for a more autonomous role in the world? Enderby Smith: While not surprising given the purpose of the act, arguably the most striking feature of the new legislation is the substantial increase in powers it provides to the UK government. In its preamble, the act is said to “make provision enabling sanctions to be imposed where appropriate for the purposes of compliance with United Nations obligations or other international obligations or for the purposes of furthering the prevention of terrorism or for the purposes of national security or international peace and security or for the purposes of furthering foreign policy objectives”. A further amendment to the act also allows the UK to use sanctions to promote human rights. This is a wide-ranging mandate. Moreover, the act allows the UK government to designate persons by reference to a description rather than a specific name. While the government claims this power will only be exercised where it is unable to identify the relevant persons by name, this provision has raised concerns over potential uncertainty and the burden it will place on businesses and their compliance teams. The government says it will provide as much information as possible to help identify the appropriate individuals. However, the question remains how useful this will be in practice where the government itself has been unable to achieve effective identification. One could be forgiven for interpreting this simply as a means to give practical effect to foreign policy decisions about broad categories of persons the government wishes to be sanctioned.  Also of note is that under the act the current EU requirement for sanctions to be reviewed annually is extended to every three years. Designated persons will still be able to challenge their designations, and the act also provides for a designation to be revoked if the government considers that the required conditions are not met in respect of the relevant designation “at any time”. However, this considerable extension of time between default reviews will no doubt shift the burden away from government and on to designated persons. Its inclusion is perhaps suggestive of a more heavy-handed sanctions programme post-Brexit.   GTR: You mention the possible burden placed on businesses by the government’s increased powers. Are there any other ways the act may make life more difficult for third parties dealing with potentially sanctioned persons? Enderby Smith: Under the act, third-party institutions wishing to deal with potentially designated persons may find themselves facing increased reporting requirements. Currently only certain businesses are subject to reporting requirements in the UK, such as legal and financial services professionals. However, the government may use the act, through secondary legislation, to broaden such requirements to all natural and legal persons. They would be required to report to the government where they become aware, or have reasonable grounds to suspect, that they are dealing with a designated person or that an offence has been committed by a designated person. There would likely be criminal penalties for those who fail to comply. This development, coupled with the potential new problems interpreting the scope of sanctions that I mentioned previously, suggests that it may become more difficult for third parties to navigate the sanctions landscape.   GTR: Given the act allows the UK government to forge its own path when it comes to its sanctions programme, which direction do you think it will choose to take? Enderby Smith: This is a political and diplomatic question. Sanctions are after all a stark expression of a country’s foreign policy objectives, and the UK’s approach will be heavily contingent on how it sees itself on the global stage post-Brexit. The UK government has strongly signalled its desire to continue to work closely with the EU post Brexit. In this respect, we may see the UK government simply using the act to replicate sanctions coming out of the EU. However, this may be unacceptable on a political level amongst those in favour of a cleaner break, and also on a practical level, with the difficulties implicit in seeking to align foreign policy objectives with those of 28 other countries without membership of a central administration. Another possibility is gravitation towards the US, in line with the two countries’ “special relationship”. This would be an interesting and not altogether unsurprising move, given the two countries often agree on matters of foreign policy, and the likely increased dependency the UK will have on the US once its ties with Europe are lessened.   GTR: How might a move towards the US result in a different approach by the UK government to its sanctions regime? Enderby Smith: Such a move may result in a significant widening of the UK government’s application of sanctions, with broad-scope sanctions applying to whole geographical areas or whole groups of people – in contrast to the EU’s approach which has generally been to target individual sectors or persons. The wider powers granted under the act, and in particular the government’s ability to designate by description rather than by name, would certainly seem to allow for such expansion should the UK government see fit, and are perhaps telling of the government’s intended approach. Should the UK incline towards the US’ methods, it will be interesting to see whether it will also move towards the adoption of so-called secondary sanctions. Secondary sanctions “bite” on a sanctioning state’s citizens as with primary sanctions. However, persons are designated on the basis of who they do business with, essentially forcing them to make a choice between trading with the true target of the sanctions – for example an Iranian company – or the US. Thus a form of extraterritorial reach is achieved. It is unlikely that secondary sanctions applied by the UK would be as effective as the US’, given the disparity in economic clout between the two nations. However, such a move would not be inconsequential and would herald a much more aggressive approach by the UK to matters of foreign policy. The post UK could move towards US-style sanctions regime after Brexit appeared first on Global Trade Review (GTR).

World Bank covers loans to Myanmar and Pakistan

From Global Trade Review (GTR) | By Finbarr Bermingham

world bank The insurance arm of the World Bank Group has issued guarantees for commercial loans to projects in Myanmar and Pakistan. In Myanmar, the Multilateral Investment Guarantee Agency (Miga) is to cover US$114.76mn-worth of loans from the Industrial and Commercial Bank of China (ICBC) to Myanmar Fibre Optic Communication Network. The funds will cover the installation and maintenance of 4,000km of fibre optic cable through six states and eight cities in the country. It supports a government aim of connecting 90% of Myanmar to a telecommunications network by 2020. Miga’s guarantee provides protection for 5.5 years against the risks of transfer restriction, expropriation, war and civil disturbances. The organisation previously issued a guarantee for a 4,500km cable network in January 2017. In Pakistan the agency is covering a US$66mn loan from Sojitz Corporation, a Japanese trading company, to Hyundai Nishat Motor, a joint venture between the Korean carmaker Hyundai and the Nishat Group, one of the largest conglomerates in Pakistan. The guarantee will support the construction, design and operation of a vehicle assembly plant in Lahore, which will produce three Hyundai-branded vehicles from 2020. With an annual production capacity of 30,000 vehicles, the plant will source supplies such as tyres, rubber parts and batteries from local vendors. Again, the risks covered by Miga are transfer restriction, expropriation, war and civil disturbances – this time for 15 years. The package will help diversify Pakistan’s automotive industry, which is at this point dominated by Japanese companies. Sojitz, the lender, will operate a number of dealerships in Pakistan. The flagship dealership will be in Lahore, with a number of franchises to be opened around the country. The company has committed to investing US$136.5mn in Pakistan’s automotive sector. “This project will help strengthen Pakistan’s automotive industry, reducing vehicle shortages, improving safety standards, and increasing the choices consumers will have available to them,” says Keiko Honda, CEO and executive vice-president of Miga.       The post World Bank covers loans to Myanmar and Pakistan appeared first on Global Trade Review (GTR).

Eastwood leaves Gii, joins BACB

From Global Trade Review (GTR) | By Shannon Manders

Clint Eastwood has left Gii Capital Advisors after a year of service and joined BACB as head of trade distribution. He replaces Debbie Emmanuel, who is leaving the bank, and reports to James Cantamantu-Koomson, BACB’s managing director of client coverage. Eastwood will “work with and across all the country, regional and product teams to continue developing our asset distribution capacity to further enhance our solution delivery offering to our customers”, a spokesperson for the bank tells GTR. Eastwood started at Gii in September last year, having left a 22-year career at Standard Chartered in March. At the time, Eastwood said the move away from the bank was “so refreshing”. At Gii, he was director of trade distribution and asset sales. He was hired as part of the firm’s expansion strategy, with Gii announcing then that it would be growing its personnel – with more hires to come in the “not too distant future”. As part of its drive to expand its offerings, in December last year Gii launched a new fund to invest in trade receivables and structured assets collateralised by trade receivables globally. At Standard Chartered, Eastwood was most recently director of transaction banking, trade asset sales and syndications for Europe and Sub-Saharan Africa. He started his banking career there in 1999. He remains based in London. The post Eastwood leaves Gii, joins BACB appeared first on Global Trade Review (GTR).
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