Structured finance

Full range of commodities

AKA distinguishes the following different types of structured finance:

• Asset-based finance
• Unsecured working capital finance
• Receivables solutions

Participations are possible in syndicated or bilateral form. Usually, the borrowers are producers, suppliers or intermediaries trading in commodities and based in the emerging markets. Commodities cover the entire range of primary and secondary raw materials. Primary raw materials include metals, sources of energy (e.g. crude oil and petrochemical distillates), agricultural produce and precious metals. Secondary raw materials are composed of highly tradable processed raw materials, such as petrochemical products.

Asset-based finance

• Pre-export finance (PXF) is structured, receivables-based finance. These products are based on producers’ and suppliers’ ability to deliver as well as the buyer’s solvency. The broad control of transaction-specific supply chains and the resulting cash flows as well as the extensive mitigation of country risks are crucial elements.
• Prepayment finance (PPF) is structured short-term finance based on the producer’s performance and ability to deliver. The advance purchase price payment and credit is settled by physical delivery of the goods. These structures are based on broad control of transaction-specific performance, quality, warehouse, transport and delivery risks.
• Borrowing base finance (BB) is revolving working capital finance. Here, the available credit limit is linked to the value of the underlying assets. Normally, a borrowing base is underpinned by inventories and receivables, which are usually pledged as collateral under the loan contract. The main elements of these structures are the recoverable value and tradability of the underlying assets.
• Reserve base lending (RBL) in the oil and gas sector is revolving finance – similar to a borrowing base – which is closely linked to underlying deposits of raw materials. The maximum amount of the finance is calculated according to the expected value of the future oil or gas production in the light of various factors such as the size of the reserves, completion and production risks, expected prices and costs, price hedging mechanisms, taxes and discount rates.

Working capital finance

• A revolving credit facility (RCF) is short to medium-term working capital finance. AKA finances commodity and trade flows of producers, processors and traders of raw materials. This financing is based on the customer’s credit rating. It is very convenient as it can be drawn on flexibly up to a certain limit and within a predefined period.

Receivables Finance

• Receivables Finance (RF) is a short-dated financial product for generating cash at short notice and for improving the balance sheet. It is based on a physical transaction that has already been executed. Many different structures are possible, including factoring with or without recourse, forfeiting and bill purchasing.