Financial Strength

Our Approach to global commerce

We raise financing across a variety of jurisdictions in the U.S., Europe, and Asia-Pacific. We match the type of financing to the business requirement and organize our business in a manner reflecting investment grade credit rating. As a physical commodity trading house, we uphold a balanced capital structure and match financial resources with funding requirements, ensuring that long term debt is primarily used to support long term investments, while short-term debt is used to support ongoing business in financing working capital needs.

Gardewine will utilise on short term secured lending facilities such as traditional trade finance tied to specific commodity transactions.

LETTERS OF CREDIT

  • Gardewine will seek short term credit facilities secured by the commodity in the form of Letters of Credit, which will be made available to the seller. These facilities will be self-liquidating in the sense that debt will be repaid immediately from the proceeds of the sale of the commodity being financed

PURCHASE ORDER FINANCE

  • Helps companies especially small and medium-sized trading houses pay their suppliers when they receive large orders but don’t have enough cash flow. This type of finance provides funds to pay suppliers based on purchase orders that have been received, ensuring the company can fulfill the order.

SUPPLY CHAIN FINANCE

  • Is designed to improve cash flow by allowing suppliers to get paid early while providing buyers with more time to pay. It’s a win-win for both parties. Creating flexibility and efficiency in the supply chain.

Transactional trade finance provides commodity traders with the financial fuel for their daily bread-and-butter business of buying, shipping and selling commodities around the world. But this is short term-credit, and it does not put banks under any ongoing obligation to continue to lend.

SECURITIZATION

  • Several trading firms set up Special Purpose Vehicles (SPVs) that issue long term bond facilities backed by trade receivables. Institutional investors acquire these asset-backed securities. This in a sense is a hybrid between a capital market operation and trade finance. It works in the following way;
  • When a trading firm sells a cargo, it gets an invoice promising to pay it in, say 30-60 days. Instead of waiting that long for a payment, the trading firm sells the invoice immediately to its securitization vehicle.
  • The Special Purpose company uses the funds raised from its bond facility to acquire these receivables. In turn, these receivables support a revolving bond facility giving the trading firm longer credit. The mechanization shortens the trading firm’s liquidity cycle, enabling it to trade more.

REPURCHASE AGREEMENTS

  • Repurchase Agreements involve Gardewine selling a commodity to a bank, and simultaneously agreeing to buy it back a week later. The operation, usually involving LME-grade metals, is repeated week after week, because the banks find it more attractive (In terms of the return on equity) to own the material rather than finance it. This is because bank’s regulatory capital requirement for asset ownership is lower than that for lending activities.

POOLED COLLATERAL

  • Gardewine will seek to establish a borrowing base in regions where it will do sizeable and regular trades. At regular intervals, Gardewine will provide a bank or banks with an overview of all its inventory and receivables, against which it will negotiate lines of credit.

AGENCY FINANCE

  • Export Credit Agencies, commonly known as ECA’s, are public government-owned agencies and entities that provide government-backed loans, guarantees and insurance to trading houses from their home country that seek to do business overseas in different markets
  • ECA’s aim to help promote the exports of their home country by allowing exporters to provide buyers credit to importers and by insuring transactions that take place in risky markets.
  • An ECA’s role is usually limited to guaranteeing transactions, and it is not uncommon to have several ECA’s guaranteeing different parts of a deal involving exporters from various countries (particularly in big-ticket project financing). However, more and more ECA’s are providing direct loans.
  • Export Finance refers to credit facilities and techniques of payment at the pre-shipment or post-shipment stages.

PREPAYMENTS (Syndicated Credit Facilities)

  • In a typical world of global commodities trading, there’s an imperfect match between the financial needs of producers and exporters on one hand, and buyers and importers on the other. Producers prefer being paid at the time of sale, so they can finance more production. Buyers would rather settle after receiving the goods, so they can quickly raise cash by reselling them. To bridge this gap, intermediation is needed in the form of Trade Finance. It is estimated that four fifths of global trade transactions rely on specialised loans or guarantees which make up the global trade finance pool.
  • Pre-export financing by banks remains an important source of credit for producers. But in the last ten years, pre-export financing has increasingly been supplemented by prepayments facilities arranged and structured by the commodity trading firms themselves. Especially in emerging market countries where access to bank finance and to public capital markets has become more difficult, a wide range of clients from National Oil Companies and refining giants to small and medium-sized mining companies have turned to traders for help in raising capital. The result has been a sharp rise in prepayments by commodities traders. In providing finance in this way, trading firms are enabling production that would otherwise not be possible-thus underpinning economic growth, job creation and the generation of fiscal revenues in the countries concerned.