Published: May 21, 2009
Stemcor, the UK-based steel trader, cheered the commodity finance market with a US$480mn renewal of its revolving credit facility. The new loan is US$80mn more than the company hoped to raise.
The deal was a renewal of the one-year tranche of a US$700mn facility raised in 2008. The remainder of the facility is three-year. The deal was arranged by BNP Paribas, Fortis, ING, Societe Generale and Royal Bank of Scotland.
Colin Heritage, director of trade finance at Stemcor, says: “Although some banks have pulled out of commodity lending in the last year, new banks have joined, including banks from the Middle East and Asia.”
DBS Bank of Singapore and the State Bank of India were two notable new arrivals in the lead syndicate. Heritage says: “Japanese banks are also showing more appetite, and French and Dutch banks are also staying committed to the market.” However, North American banks were not involved in the lead-syndicate.
Heritage adds: “As banks pull out of commodity financing, that means insurance companies will have a greater role to play in syndicates.”
The deal is one of the few new issues to come out of the moribund commodity finance market this year. Kris Van Broekhaven, vice-president of the structured trade and export finance division at Deutsche Bank, says: “Banks shut up shop in the fourth quarter and told borrowers to come back in the first quarter of 2009. But the market didn’t really re-open.”
He adds: “Some of the smaller lenders have lessened their exposure to commodity finance, while some banks, such as KBC, have closed their commodity finance desks entirely.”
He adds: “It’s still a very difficult market. Some big borrowers still can’t raise money – TNK-BP [the Russian oil company] has been trying for months to raise a modest lending facility, and it’s not going anywhere.”