denotes premium content | Jan 6 2009 
Regular
posted 22 Feb 2005 in Volume 8 Issue 4
Obviously we in Asia have been overwhelmed by the tragedy of the tsunami.
If I think back over the past year about the times when I was shouting at my staff, fighting off the chest pains of stress, cursing my favourite banker for messing up my deal, arguing with the wife and not talking to her for days, and writing letters to the chairman of West Bromwich Albion complaining about the choice of manager, I realise it was all a waste of time; life is so fragile, it can be taken away in seconds, family and lifestyle destroyed.
It’s also time to look back on 2004. I thought a little summary of Trade Finance Corporation (TFC) ‘deals of the year’ would be appropriate. At least everybody would know what I’ve been doing since I became unemployable. After all, it might encourage some people who used to call me to try again.
My first deal of 2004, affectionately known in our office as ‘pine post one’, is a 12-month pre-export payment to a Brazilian pine wood plantation on behalf of McCorry Timber Ltd, which is based in Kota Kinabalu (KK), Malaysia. KK is a big holiday resort and there is no truth in the rumour that we always visited on Fridays and stayed over the weekend – we only didn’t do that once!
So we have a small-cap timber trader using a Cayman SPV buying pine wood via a one-year advance payment to be shipped to Portugal. We indirectly supported the Portuguese wine industry and reduced the amount of beautiful pine wood being burnt in Brazil for charcoal.
Later on in the year we did ‘pine post two’, which is the same structure, only the wood ended up in the California wine valleys. We could never understand why so many banks were volunteering to undertake a due diligence visit on this one.
We started the year with a small metal deal and ended it with a big one. We began with a $1m pre-payment deal for the Guangyin smelter in Guanxi province, China. This had been an idle, bankrupt ten-year-old zinc smelter previously owned by the government and bought by a Hong Kong entrepreneur for next to nothing. The pre-payment was structured in four month rollovers with prepaid zinc then ending up in C&P Asia’s warehouse in Guangzhou for continuing stock financing before export. The greatest achievement was getting so many banks to visit a smelter seven hours from the nearest airport for just a $1m deal. The other achievement was securing a $10m stock financing credit line for the small Hong Kong company that acted as the offtaker. This company had little or no paper substance but is owned by an experienced metal trader.
In the past few months, we have worked hard to close (and just did) a $10m two-year pre-export deal for Xiangfen smelter in Shanxi province, China. Classic performance-risk stuff, but nice to work on such a deal with a mid-cap offtaker rather than one of the big ones, and a very knowledgeable and capable bank. All will be revealed at a later date when we write a nice story about it.
Another of my favourites is the working-capital loan we did for a smallish Shanghai-based chartering company. This company is hiring vessels every day and then chartering them out mainly to big commodity trading companies that are carrying both hard and soft commodities. The rolling loan was structured by paying the hires directly and having full assignment of all the charter proceeds into escrow – I would like to think it a ‘TFC unique’ structuring arrangement which we hope to repeat in 2005.
So another year of competing with banks to get deals and then persuading the same banks to cough up the money. Another year of finding the bank that can do something, that has some desire to do something or has somebody employed who can do something. Already this year I am struck (again) by this wonderful consultant’s concept called the matrix organisational structure.
When I was with Noble, I was visited by a Hong Kong branch of a Singaporean bank. This guy told me he wanted to do ‘this and that’ for Noble, asked me for heaps of information and then, because he didn’t revert, I called him. Somebody took a message saying he was busy since it was his last day before his holiday. I asked this person to pass on the message that I wanted a response. At 6pm I received a one-line-email saying: “Our bank cannot deal with commodity companies and I am on holiday now.”
A few weeks ago I was approached by the Singapore office of the same bank. This guy wanted to introduce ‘global transaction services’– “we structure trade deals, we are hungry for business”. He asked for some deals and I passed him some basic information. He kept asking for more information and I was willing. Then he told me that he was only a product team and since I was in Hong Kong he had introduced me to his Hong Kong branch…and the contact details were… guess who?
Wishing all readers a successful and less stressful 2005.
David Sullivan is CEO of Trade Finance Corporation in Hong Kong
