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Post by ablrateandy on Jun 22, 2016 11:10:32 GMT
Hello all,
We should (subject to docs and credit checks!) be launching a two year deal towards the end of the week paying 12pc.
The transaction is to provide financing for a well respected trade finance firm. The proceeds will be used to provide trade finance loans to their clients. Typically a trade finance loan is where an SME is selling products to a larger firm but needs the cash up front. Whilst I can't recommend an investment, the security package on this is worth looking at to see the value :
1. The SPV generally has a legal charge over the goods
2. The SPV generally has a charge over the cash due from the order
3. The SPV will be the beneficiary of a credit insurance policy that covers buyer default OR will be the beneficiary of a Letter of Credit confirmed by a UK bank which can be drawn in the event of non-payment
4. The trade finance company is providing a full guarantee to the SPV
The management team have over a century of experience in the sector between them.
We will make management available for a conference call to give more detail as well as providing examples of some of their prior transactions.
Loan size will be £300k-1mio and should be open for a week.
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Steerpike
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Post by Steerpike on Jun 22, 2016 12:02:17 GMT
This sounds interesting.
I wonder if this is the same company that has sourced a series of loans through another platform in the last few years.
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oldgrumpy
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Post by oldgrumpy on Jun 22, 2016 12:14:16 GMT
This sounds interesting. I wonder if this is the same company that has sourced a series of loans through another platform in the last few years. I can't imagine that platform persuading them to increase their rate to 12% from 10%. We still await the result of negotiations on that one, but what's the betting we are offered 9% or even 8.5% for the same risk as before (combined with a two figure allocation to replace our existing four/five figure investments) - maybe all loans now upgraded there to A/A+ like on Fursty Crabapples?
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Steerpike
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Post by Steerpike on Jun 22, 2016 12:37:37 GMT
This sounds interesting. I wonder if this is the same company that has sourced a series of loans through another platform in the last few years. I can't imagine that platform persuading them to increase their rate to 12% from 10%. We still await the result of negotiations on that one, but what's the betting we are offered 9% or even 8.5% for the same risk as before (combined with a two figure allocation to replace our existing four/five figure investments) - maybe all loans now upgraded there to A/A+ like on Fursty Crabapples? Indeed. The Lender Update last week referred to a meeting in May the details of which may emerge in July. There is also the added ingredient of the loans at much lower rates, more recently for much shorter terms, on yet another platform.
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Post by ablrateandy on Jun 22, 2016 13:15:21 GMT
With trade finance you generally don't really want to be involved in individual transactions imho. Things can go wrong.... That's why we've structured it this way. Default rates are tiny but they do exist. We may put some individual deals up in future but I'd have to be pretty confident in the guarantee.
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james
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Post by james on Jun 22, 2016 13:55:45 GMT
Agreed about combining deals and the trade finance firm providing exchange being the way to go. It's a nice way to manage the risk of individual transactions.
Is there any cap on the percentage of loan value that can be in any one transaction? Shouldn't matter while the trade finance firm's guarantee is in place but it's of course good to have managed exposure for the contingency of their inability to meet the guarantee.
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Post by ablrateandy on Jun 22, 2016 14:00:42 GMT
At the moment there won't be a cap, simply because I don't know how big the loan will be. The firm are very accommodating so I think if it pulls down over 500k we will try to agree a diversification method. It has been discussed but practically assigning partial amounts of LCs and insurance can be difficult. It's a very document heavy business and multiplying that may make it a bit unworkable. We will probably assume a right of veto on anything that we (ie. Ablrate) don't like as an underlying transaction.
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Post by ladywhitenap on Jun 22, 2016 15:32:29 GMT
Andy, Will this be paying interest on a monthly basis or all at the end?
Thanks
LW
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Post by bracknellboy on Jun 22, 2016 15:34:49 GMT
This sounds interesting. I wonder if this is the same company that has sourced a series of loans through another platform in the last few years. And which has some loans coming up to expiry, and which before being on that platform was on another platform. Nah, couldn't be.
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stevio
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Post by stevio on Jun 22, 2016 15:58:58 GMT
This sounds interesting. I wonder if this is the same company that has sourced a series of loans through another platform in the last few years. And which has some loans coming up to expiry, and which before being on that platform was on another platform. Nah, couldn't be. So is that good or bad? Is it a good track record?
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Post by ablrateandy on Jun 22, 2016 16:20:29 GMT
If someone tells me the name I'll confirm or deny. As far as I know this company has been privately funded by Singapore HNW. Name begins with M.
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Post by bracknellboy on Jun 22, 2016 16:23:54 GMT
If someone tells me the name I'll confirm or deny. As far as I know this company has been privately funded by Singapore HNW. Name begins with M. I was getting all excited and ready to shout SNAP, next letter please. but sadly for that game of hangmans noose, it's only the loan name on a certain platform that begins with an M
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Post by ablrateandy on Jun 22, 2016 16:48:43 GMT
Ah a kindly fella reminded me who it is. It's not them.
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ben
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Post by ben on Jun 22, 2016 16:55:19 GMT
And which has some loans coming up to expiry, and which before being on that platform was on another platform. Nah, couldn't be. So is that good or bad? Is it a good track record? It doesnt sound like them which is good if it was them would probably be bad as they wouldnt have basicaly just borrorowed again to repay a previous loan and with it being a higher percentage the previous it be very unlikely they would be able to repay. It would be getting a bit like some of the SS loans just carrying on refiancing in some vaigue hope there plan will work and if it does not very little cost to them.
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Post by ablrateandy on Jun 23, 2016 5:06:36 GMT
It's definitely not them! This is very much a transactional business - if you are lending to a trade finance company you want to ensure that you are lending on specific security. The SPV structure ensures that lender money is EITHER being used for a transaction OR being held in cash. Whilst they may well want to roll the deal after two years, there should be no problem with them repaying the loan as long as they have stuck to the rules. It should never be used for GCP.
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