USA - a model of sector
specialization
managmgliquidity/F&A
l* J'j. r o A What'sNewS
Funding tools
CD programs
Long-term instruments
In a further move to underline our role as a global knowledge bank that is
closely tuned to local realities in our core food and agribusiness (F&A) markets,
our United States operation has introduced a sector-specific market approach
that may well prove a harbinger for things to come in other parts of our
network including Europe and Australasia.
Wine not?
Key funding instruments include publicly
listed bonds guaranteed by RN, as well as
private placements (loans or notes, usually
guilder denominated, that are issued both
domestically and abroad). Euro medium
term notes (EMTN's) are issued under a
new umbrella debt program which allows
RN and other RN-guaranteed entities to
issue in a wide variety of currencies and
structures, using more streamlined
documentation procedures. In March, for
instance, we launched an AUD 5 billion
funding program (the Australian market is
growing rapidly in volume, maturities are
lengthening, and the underlying economy
is less sensitive to developments elsewhere
in Asia). In Singapore, we are working on
a similarly important transaction, another
example of a trend towards region-specific
funding instruments issued under a unified
Rabobank umbrella.
Other important programs include
certificates of deposit (CDs) as well as
commercial paper (CP) issued by
Rabobank or its entities under a RN
guarantee. Again in late February, we
centrally launched a short-term EUR 25
billion CD program that ranks among
the biggest in Europe, and which has
actively involved our entire global
network of sales people ranging front
New York to Singapore to Hong Kong.
What makes this program unique is that
the market valuation for these CDs is
visible to all traders on the Bloomberg
screen (symbol: RACD), as well as the
fact that we now have one price for all
the funds issued by the Rabobank
organization (previously, London,
Utrecht, and Paris all had their own CD
programs). Trading in these, as well as
Dublin and New York-originated
programs, is executed by the short-term
interest rates (STIR) team under Pablo
Vergara (Utrecht), Jason van Praagh
(London), Fergus Murphy (Dublin), Amy
McCormack (New York), Andrew
Quoyle (Australia), and several
colleagues in Singapore. 'What all of this
rneans in effect is that we're more
transparent and we present one unified
face to the market,' explains Dijkstra.
'Another important trend is the tendency
for these programs to become bigger -
an average of EUR 1 billion.'
But size isn't everything. Also on the long
term side, the team headed by Patrick
Mitchell and including Dick Visser has
developed innovative new funding tools
which marry our triple-A rating with our
global expertise. Examples are structured
notes specially geared to individual
investors; these enable them to take a
view on likely interest rate or other
market developments. Buyers like pension
funds are offered an opportunity to
outperform the indices; while they still
invest the bulk of their portfolio in bonds,
they can now also purchase structured
notes and other credits which imply
further upside potential. Another category
of long-term instrument is the smaller
syndicated transactions and private
placements, averaging EUR 200 million,
aimed both at our own retail clients and
those of other banks, largely in
Switzerland and the Benelux. 'The key is
that we're becoming flexible and diverse
enough to service the investor base on a
global scale,' says Dijkstra. 'We have
enough instruments in place to quickly
issue the products they want.' This
flexibility on the funding side, combined
with more dynamic and proactive
management on balance sheet, solvency
and credit issues, will be crucial tools as
we seek to consolidate our considerable
gains to date.
From the start of January, our North
American F&A activities have been
organized around eight specific product
sectors that are most closely in line with
our evolving cliënt profile on that
continent. The sectors include beef,
cotton, erop inputs, fresh produce
(divided between the east and west
coasts), grains and edible oils, pork,
poultry, and wine. All other F&A sectors
will continue to be handled on a
geographic basis. 'Traditionally, we
defined F&A in broader terms,' says Bob
Bucklin, who heads our corporate bank
in the US. 'However, it's become
increasingly clear that sector
specialization is the way to go in terms
of winning future business, leveraging
our strengths, and moving us closer to
higher decision-making levels within our
cliënt base. We picked these sectors with
a view that either we are, or will
become, the number one or two bank in
the field. For instance, we didn't
specifically single out beverages, even
though it ranks among our global target
sectors, because we recognized that it
was unrealistic to expect to act as house
bank for Coca-Cola, in the short-term.
We have a much better chance in the
wine sub-sector, for example, which has
highly technical financial needs and
offers more opportunities.'
According to John McHugh of our San
Francisco office, the profile of the wine
business stands in sharp contrast to that
of some others, like grain or beef. It is a
consumer market - driven less by
commodity cycles than it is conditioned
by salesmanship and progress in brand
development. Success in the United States
depends on control of shelf space among
the retail chains. One recent trend has
been for these large branded producers
to meet competition from Europe and
South America by extending their own
operations into those regions, importing
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