Structured Trade and Commodity Finance This course is presented in London on: September 2018

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1 Structured Trade and Commodity Finance This course is presented in London on: September 2018 The Banking and Corporate Finance Training Specialist

2 Course Objectives Participants will: Be introduced to what is meant by structured trade and commodity finance Learn about the markets, the softs, oils & gas and LME Explore the grain, mean and tropical markets alongside new participants in those markets Get to grips with emerging markets and the risks alongside how strucutred approaches assist and what a good collateral is Expand knowledge on pre-finance and the risks relating to grower/producer finance Gain an understaind Course Overview of the green clause and red clause credits Master the key documentation as a risk mitigant Learn about financing commodities, structures and risk management Analyse warehousing and asset backed structures, warehouse receipts and WRF structues Explore the collateral management and different types of insurance Review mining, oil and gas finance alongside liquified natural gas. Background of the trainer Your course director has spent more than 40 years in the banking and financial sector, much of it in a senior managerial/director role. He is a former Institute of Banking Lecturer, having gained distinctions in the exams. He is a subject matter aspect on all aspects of retail, corporate and global banking, including risk management and regulatory compliance. He has lectured extensively to both leading global financial institutions and to smaller bespoke specialists. He has delivered extensive programmes in all parts of the world including the USA, Europe, MENA, Africa and Hong Kong. He is currently an accredited Master Trainer at the world s biggest global bank. Course Overview Commodity markets have seen unprecedented price fluctuations in recent times making the sector much more challenging. The course will attempt to deal with these challenges but ultimately the whole sector remains inherently more risky than it was. Trade Finance remains the engine at the heart of global economic growth with China still probably the most important participant. Commodity Finance sits at the heart of this trade dominated by oil and gas which according to some estimates, accounts for as much as 70% of all commodity trade. The impact of both Brexit and The Trump presidency are very hard to predict and both the short and medium term outlooks remain uncertain which is not helpful. Most markets are holding their breath. Similarly we have just seen the latest agreement by OPEC and others (primarily driven by Saudi Arabia) to restrict production and hopefully boost oil prices. Early signs show it is working but will it last? Structured Trade and Commodity finance can mean many things and many banks will have their own particular definition. Generally speaking it is an activity dedicated to the financing of high-value supply chains. Every loan is tailor-made to client, transaction and region. They tend to be more long-term sometimes up to five years. Structured trade finance usually refers to the financing of cross-border commodity flows (and as such is most commonly known as structured commodity finance). Structured commodity finance encompasses several different methods of finance for producers and traders of goods and commodities, including:

3 Trading in commodities often involves dynamic and fast-moving commodity markets, often with counterparties in emerging market territories. Risk mitigation and the ability to swiftly devise structures to make available financing of transactions are keys to success. Whilst ongoing innovations and technological developments make the market more transparent this can be a high risk area for the uninitiated or unprepared. As a commodity banker, trader or even a producer, a flexible and creative approach, balanced by an appropriate degree of caution, will minimise risks. This course will highlight the key concepts involved in commodity trading with elements drawn from real situations. It will also cover liquidity issues and lightly traded commodities. Course Content Introduction What do we mean by structured trade What is commodity finance Categories of Commodities Commodity Pricing Volatility The exchanges and their influence The rise of techniques to manage risk Participants Current Trends The Markets The softs Oil & Gas LME The grain markets - the meat markets and the tropical markets in coffee, cocoa, sugar, etc Biofuels.- Ethanol New participants in the market Over / under supply Traditional hedging techniques The availability of data and access to the markets The concept of price insurance Electronic platforms. The rise of the indexes Exchange Traded Funds Case Study: Delegates are asked to consider the seprate risks of upstream, midstream and down stream operations and explain which could be funded by a financial institution and why. Emerging Markets The risks Political & Economic Risks and mitigants Performance and operational risk and mitigants Credit & Bank risks and mitigants Price Risk IForged, fraudulent or illegal contracts Documents of title

4 Markets & Players Risk analysis of a commodity transaction How structured approaches assist What is good collateral Case study: An emerging market deal. Pre-Finance The risks relating to grower/producer finance Green Clause Credits Red Clause Credits Ownership issues Licenses, export quotas, foreign currency controls Problems with non delivery SBLC s Prefinance versus prepayment Limited Recourse v unlimited recourse Case study: Using these in practice Key Documentation as a Risk Mitigant Transport documents MMTD & BoL s Charter-party contracts and contracts of affreightment Documents representing goods Title, negotiability, endorsement Incoterms Voyage time and trip transfers Shipper/charterer and vessel owner obligations Loading & discharge of cargo Case study: how to structure a deal to minimise risk and the trade off between lower risk and potentially less business. Financing Commodities Commodity contracts Risk analysis of commodity flows Risk analysis of key parties The importance of document control follow the doggy! Logistics & the value chain Structures Pre-export finance L/C, SBLC and other structures Tolling Inventory finance & CMA s Asset backed finance Countertrade structures Case study: A structured deal Risk Management Risk mitigation Exchange traded commodities Links between cash & futures markets Delivery to and from terminal markets Cash flow acceleration

5 Off balance sheet considerations Countertrade structures Problems with MMTD transactions Case study: Looking for high risk indicators and how to mitigate them. Warehousing Asset backed structures The business case for warehousing Warehouse receipts WRF structures Raising finance against warehouse backed securities Problems with pledges over inventory, physical dispossession Legal requirements Fraud, misrepresentation and similar issues WH receipts a document of title, or just a receipt Risk mitigation Case study: Based on a real case using Warehousing as a risk mitigant Collateral Management Liability of collateral managers Collateral Management Agreement (CMA) Negotiating CMA documents Reviewing components of the CMA Tolling finance Performance and country risks Non-delivery issues/problems Financiers priorities Insurance solutions Insurance Marine insurance ICC/A/B/C contingency cover Security assignment v loss payee Political and country risk Contract frustration Asset confiscation Credit insurance Legal problems Breach of warranty Failure to act appropriately to mitigate insured losses (acting as if uninsured) Price Risks Chinese influence Price risk management Price discovery exchange Traded versus OTC Cash and futures markets Contracts to hedge Bank v customer requirements/benefits Case study: How can we manage price risk in practice Mining Finance Concept of the business The cost to bring to market semi-finished material Inhospitable locations Financing new mines

6 The lead/lag time for production Technical developments and reworking older mines The issue of current and future price projections Trading issues, hedging Borrowing and Lending Case study: A real life example Oil & Gas Finance The energy complexes Crude oil market Buying oil on Wall Street The role of the.majors The supply demand equation State intervention The exploration and extraction of oil Trading in crude oil. Heating oil and gasoline Gas market Case study: Real life example LNG Liquified Natural Gas The energy complexes The growth of the LNG debt market LNG liquefaction finance: LNG regas finance LNG ship finance Recent trends: Financing of integrated LNG chains Changing downstream markets and trading patterns Increasing flexibility in LNG sales and financing contracts Case study: Real life example 9:30-17:00 London Standard Price: 1,050 + VAT Membership Price: VAT Delivering this course in-house for you to a number of participants could be very cost effective.