deals
deal of the month
Merging units
NSSbs./
What'sNewS Issue 12' December 1998 I "J
As a pilot implementation of this global
plan, the Utrecht back offices formerly
known as BOF (back office financial
markets) and DOA (derivatives
operations and accounting) are now
being merged into a new unit known as
IBS Utrecht. London has also been
restructured along similar lines. 'Once we
have established this workable base in
Utrecht and London, the same structure
can be adapted by other offices like New
York and Singapore,' Gerritsen explains.
The IBSM will have important career
implications as welk Traditionally, front
office bankers moved easily between
countries as part of their career
progression, but opportunities for those
in the back office were substantially
more limited. 'As we professionalize, and
as operations are standardized within
investment banking, careers will
inevitably become more international,'
says Gerritsen. 'There is no question that
operations professionals working in, say,
Singapore, will have the opportunity to
work in Utrecht or New York.'
The dient
TMO, the Turkish State Grain
USD 70 million financing package
for TMO
Henk Adams, Cem Mengi, Davut
Celik (Rabobank Istanbul); Barry Watson,
Ivar Cambridge, David Roche, Eric van de
Peer, Gemma Miller (Rabobank London);
Edmond 0'Connor, Brendan Malley
(Interpolis Reinsurance Service Dublin)
Our Turkish operation in Istanbul
celebrated its recent opening with a
strategically important inaugural deal - a
grain financing package arranged in
cooperation with Rabobank London for
the Turkish State Grain Board (known as
TMO). TMO is not only Turkey's leading
grain purchaser and exporter, but a
significant force in world grain
markets, lts exports are sought
after by leading traders such as
iargill and Glencore.
The financing requirements for
a company with such
extensive purchasing
commitments to Turkish
farmers is quite high: as much
as several hundred million
USD per season. To date, the
cross-border funding
requirements have been met
by syndicated loans backed by
Turkish treasury guarantees.
However, there are limits to
state funds available to cover
such guarantees, and TMO
had a pressing interest in
alternative solutions.
with TMO's operating mandate and at the
same time to give us the strongest possible
security position under Turkish law, has
been structured as a 'sale and repurchase'
finance contract. In effect, London branch
will actually purchase the grain and then
sell it back to TMO at the maturity date
some six months from drawdown. In the
meantime, during the life of the facility,
traders buying grain from TMO will first
make their payments into an offshore
escrow account held by London branch.
The grain will then be formally returned
to TMO's ownership for final transfer to
the buyer.
This deal places our brand new Istanbul
branch in an advantageous position to
originate further deals for the next
season and to extend its activities to
other government-related businesses such
as state-held F&A trade monopolies. Not
Members of structured trade finance team, London branch, left to right:
Barry tVofson, Ivar Cambridge, Eric van de Peer, lan Clarkson, Roger
Hawes, Gemma Miller. Missing from picture: David Roche
Since much of TMO's cash llow is tied up
Ai large stocks of grain, London branch
realized that one obvious solution was to
free up some of this cash by raising
finance using the physical grain as se
curity. This solution, designed to comply
only did we succeed in putting together a
deal for TMO where other better-
established international banks failed,
despite longer experience in Turkey, we
were also crucially able to structure this
cross-border, asset-backed financing in
such a way that it could be extended
without the need to resort to a Turkish
treasury guarantee. 'We were delighted to
have concluded this innovative deal for
the bank; the structure was new for us
but we were considerably helped by the
open and flexible attitude of our senior
management,' as one key player said.
It also has several features that illustrate
why structured trade finance is so
important for the bank's future in
emerging markets such as Turkey. The
structure was customized for our clients'
needs, offering precisely the right form of
finance at the right time. However, the
basic concept is such that it is eminently
repeatable. Yielding an attractive return
on solvency, it features a very low usage
of country lines in relation to its size,
and it has been extended with
substantially lower credit exposure
thanks to the use of private insurance.
Country exposure is minimised
since repayment is offshore of
Turkey. 'In addition to these
clear benefits for the bank
itself, the transaction also gives
TMO a good deal of
autonomy by reducing its
reliance on public funds; this
may explain why we now have
three new propositions under
discussion with the same
cliënt,' says Ivar Cambridge.
This deal came about because
of an intensive and exemplary
level of networking between
different parts of the bank.
London branch's structured
trade finance unit arranged
the deal using a wide range of
trade finance and risk
mitigation tools, and they also arranged
the credit. In addition to generating
the deal, Istanbul branch mobilized
senior management support while
Interpolis was active in arranging
reinsurance on the considerable private
insurance cover.
