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Who should attend
Attendees are expected to be equipped with prior knowledge about mechanisms relating to Open Account, Letters of Credit, Bank Guarantees and Documentary Collections.
For those less familiar with these topics, pre-course reading material will be provided.
About the course
The Structured Trade & Commodity Finance course will provide you with a comprehensive view of international trade and commodities, with a particular focus on the interplay between trade finance instruments and supply chains as they apply to the commodities business.
This intermediate-level, four-day course examines various trade finance product concepts and their application to supply chains and financing structures typically used to facilitate commodity flows. By the end of the course, you will know how to apply a risk-sensitive approach to commodities trade financing and financing agreements.
- International trade risks in emerging markets
- Financing trade in challenging markets
- Pre-finance – what can go wrong?
- Payables-centric solutions
- Warehouse/Inventory Finance
- Receivables-centric solutions
- Risks in Commodity Trade contracts
- INCOTERMS & Transport Documents
- Marine Cargo Insurance
- Commodity Price Hedging
Day 1: Focus on Risk
- Overview of international trade and commodities
- Distinguishing trade finance from other forms of corporate financing
- Examining the concept of Risk and as it applies to international trade
- Understanding commodity contracts
Risks in international trade as they apply to emerging markets
- Political risk
- Performance and operational risks
- Credit and bank risks
- Price risk
- Illegality of contracts
- Document of title
Financing trade in challenging markets
- Commodity trading - markets and players
- Evolution of the trader’s business model
- Structured trade finance and the value chain
- Risk analysis of a commodity finance transaction
- Implications of Basel Capital Accord
- Rationale for the ‘structured’ approach to trade finance
- Characteristics of good collateral
Day 2: Focus on Pre-finance
Risk considerations for pre-finance
- Pre-export to finance grower/producer
- Production and delivery conditions determining contract outcomes
- ‘Push’ factor for success of pre-finance
- What can go wrong?
- Ownership of the commodity asset
- Licenses, export quotas. foreign currency controls
- Pre-payment finance
- Limited recourse: Absence of obligation to reimburse in full upon producer’s failure to deliver
- Difference between pre-financing and pre-payment
- Tolling finance
- Performance and country risks
- Protection against non-delivery by processor
- Security interests of financier
- Insurance solutions
Case study: Metal smelting and refining
Case study exercise: Medium term pre-financing of a metal smelter
Day 3: Focus on Warehouse finance
Storage of commodities
- Warehousing considerations
- The business case for warehousing
- Use of a bonded warehouse
- Separating warehouse finance from warehouse receipts finance
- Problems with pledges over inventory stocks, physical dispossession
- Nature of a warehouse receipt; is it a document of title or only evidence of receipt?
- Legal infrastructure required to support warehouse receipt finance
Case study: Distribution of imported grain
- Repo finance against commodities traded in a liquid, well-ordered derivative market
- Collateral management arrangement
- Review of a collateral management agreement (CMA)
- Liability of a collateral manager
- Case study: Sugar refining/ Petroleum storage
Case study exercise: Designing a credit line for an emerging market borrower
Day 4: Subsidiary topics essential for competent handling of commodities trade finance
Alternative financing methods
- ‘Switch’ trade
- Clearing currencies and escrow account trade
Case study: Capital goods import
- Incoterms 2010
- Flag of vessel; avoiding sanctions
- Liner & Chartered vessels
- Obligations of shipper/charterer and vessel owner
- Loading and discharge of cargo
- Documents representing goods
- Documents of Title; title, negotiability and endorsements
- Principles of marine insurance
- ICC A/B/C, seller’s risk cover
- Security over insurances (assignment vs. loss payee)
Political and Credit Risk Insurances
- Why do banks need political risk insurance cover?
- Contract frustration
- Confiscation of assets
- Covering risk of default in payment by buyer
- OTC versus exchange-traded contracts
- Link between cash and futures markets
- Understanding contracts to hedge
- Price risk management in commodity trade
- Benefits of hedging for the borrower and lender
Case study: A hedging example Mishaps in Structured Trade Finance
Course summary and close
Srinath Keshavan is a seasoned practitioner of trade finance. He is empanelled with a global bank to deliver training in Financial Crime Compliance related to Anti-Money Laundering & Sanctions Evasion Risk. He is also a long-standing presenter of training programmes for Euromoney and World Ba...
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