initiatives
Regional change
Valueformoney
Difficult markets
What sNewS Issue 8'December 2000 5
Rl (London)
Purchase
Agreement
000 "Rabo Invest",
Russia
Re-purchase
(Buy-back) Agreement
Acceptable
Foreign Off-taker
commodity traders
and processing compa-
nies. The whole structure
works in very much the same way as
the Chilean model (see chart), hut with a
number of major differences. In Russia,
Rabo Invest lias also introduced the con
cept of having a non-Russian customer
who is contracted to purchase the com-
modities front us if the Russian cliënt does
not honour its repurchase commitment. In
addition, the commodities
are always properly and
fully insured, as well as be-
ing monitored by an inde
pendent surveyor.' Rabo In
vest policy is to check the
quality of surveyors' work
continuously.
There are a number of con-
ditions which have to be
met before Rabo Invest em-
barks on a transaction.
'The off-take agreement
between us and a Russian
cliënt has to be in place
and a similar contract with the alternative
buver must have been closed,' Pronk ex-
plains. It has proved a highly successful
proposition for a market which, as the
Russian participants at the sugar and
sweeteners conference (see WNS 7/2000)
confirmed, is extremely volatile. 'Basi-
cally,' says Pronk, 'this structure allows us
to finance targeted F&A activities for core
customers in Russia. At the same time, it
is very attractive to domestic customers
who are interested in value-for-money fi-
nancing without having to change many
of their existing technological or logistic
procedures. It is also reasonably flexible
and can be tailored to the needs and
1.The transaction is based on Commodity Repo approach and is practically implemented via 000 "Rabo Invest"
Russia - a wholly owned operational subsidary of Rabobank Group in the Russian Federation;
2. Purchase, Repurchase and (onditional Off-take Agreements are conduded simultaneously while entering into
the transaction;
3.Throughout the whole life of transaction the commodities are properly insured and monitored by an acceptable
surveyor;
4. Acceptable International Off-taker obliges to purchase the commodities from 000 "Rabo Invest" if the Russian
trader/su bsidary defaults.
Strategie structure: Rabo Invest, Moscow's evolution of the successful
Chilean model, has proven to be well worth the effort
the insurance aspect.
Providing unique solutions to Rabobank's
focus F&A customers and their clients
through a structured trade finance prod
uct which combines low solvency usage
and low country risk usage with a high
level of risk mitigation clearly provides us
with interesting opportunities worldwide.'
The evolution of a new model:
Russia's Maarten Pronk
possihilities of individual customers.'
And it's good news for the bank, too.
When the Russian crisis hit back in 1998,
a lot of financial institutions got burned.
Rabobank was one of the
few that came through the
process relatively un-
scathed. This had every-
thing to do with risk man
agement and in an
emerging market, risk
management is clearly of
paramount importance.
The Rabo Invest concept
proved a solution for niiti-
gating both credit and
country risks. 'This kind
of structure carries a re-
duced weighting,' says
Rabo Invest's Aleksei
Belyaev. 'That means we
can do around six times
the business our country limit would nor-
mally allow.' An additional advantage is
the fact the bank's funds are protected not
only by the commercial legal code, but
also by the criminal code. This is im-
mensely valuable in an environment where
the commercial code is relatively young.
It's also a product that requires little sol
vency, a factor that is very popular with
the managing board. 'The bottom line,'
Pronk says, 'is that this structure is ideal
for emerging and otherwise difficult mar
kets. We're talking a low level of opera
tional costs, relatively mitigated risks be-
cause we actually own the commodity,
and comparatively limited risk through
For more information on the exact struc
ture of Rabo Invest's asset-backed pro
gram, contact Maarten Pronk on
Maarten.Pronk@mow.rabobank.com
Since 1996 RI has cooperated with
the European Bank for Recon-
struction and Development and two
major regional banks to invest in the
Kiev International Bank. One of the
first banks in Ukraine with a strate
gie participation, the bank targeted
international and local clients in
F&A. The original agreement pro-
vided that RI would buy out EBRD's
stake at a pre-agreed sum, taking
100% ownership. This transaction
was completed on 23 October 2000.
However, the Kiev International
Bank has been operating at a loss
over the last two years and the likeli-
hood is low of a substantial int-
provcmcnt in the near futurc. At
year's end, it was therefore decided
to liquidate the bank. RI has more
than three years of experience serv-
ing both international and local
F&A businesses in the Ukrainian
market. The resulting strong rela-
tionships with local customers and
international clients operating in the
region remain important to RI, and
these clients will be serviced by,
among others, London, Utrecht,
Moscow, Warsaw and Budapest.
The valuable expertise and experi
ence of Kiev's 18-member staff will
continue to be used in the region.