Best Forfaiting Institution: London Forfaiting Company

Runner-up: Deutsche Bank
Commended: Deutsche Forfait
2007 Winner: London Forfaiting Company

The award for Best Forfaiting Institution seems almost to be reserved for London Forfaiting Company, having won it for three out of the last four. But it is won entirely on merit and reflects the company’s high standing in the market.

“London Forfaiting’s success is built upon a strong infrastructure of management resources, trading and marketing teams and administrative systems which supports the activities of the business,” says managing director Simon Lay.

A catastrophic event such as the credit crunch – a recurring theme in this year’s Awards – naturally favours forfaiting as an instrument for improving corporate liquidity, and Simon Lay and his team have certainly been busy in the past year.

“The sub-prime crisis and resulting liquidity squeeze has undoubtedly helped create a resurgence in the volume of classic supplier-credit transactions as importers and exporters seek alternative methods of financing their cross-border transactions,” says Lay.

Sub-Saharan Africa has proved to be an especially fertile ground for London Forfaiting’s services, where the company concluded several large and long-term transactions from Angola to Nigeria. “More surprisingly for us, the changing market conditions re-created interesting new opportunities in the Asian and Indian markets, where several large transactions were concluded, as well as a number of structured trade-finance transactions,” says Lay.

This last point also reflects the way in which London Forfaiting has broadened its range of trade finance services since the company was acquired by the Malta-based financial institution FIMBank in 2003.

Lay believes that such diversity – the ability to offer forfaiting alongside products based around syndicated loans and structured trade-finance – is the way forward for forfaiting institutions that want to stay relevant and prosper when the current difficult conditions subside. To that end, London Forfaiting has entered into co-operation agreements in several new markets to help source new clients for both the traditional and new products which it is developing.

“While there has been an increase in the level of ‘classic’ forfaiting transactions, if and when liquidity problems abate these may be less attractive, so the forfaiter with a broad and adaptable product range is more likely to be the one that enjoys enduring, long-term success,” says Lay.

That means being prepared for a post-credit-crunch ‘return to normality’ (just as soon as everyone has worked out just what is normal for the global financial system, of course).

“From where we stand currently, with high margins but limited liquidity, this is quite a difficult question to answer,” says Lay. “Just twelve months ago we were only just starting to see the impact of the sub-prime crisis. Initially, it was assumed that this problem would have most impact on the traditional banking community.

“However, the results have been more far-reaching than anybody at first thought. All I can really say with any certainty is that London Forfaiting’s business model will continue to change and evolve in the future. We see lots of opportunities and are developing our offices to capitalise on them,” he says.

What is also certain is that it will take a stellar performance from anyone else to displace London Forfaiting as the favourite to pick up the 2009 TFR Award for Best Forfaiting Institution, too.

“The changing market conditions re-created interesting new opportunities in the Asian and Indian markets, where several large transactions were concluded, as well as a number of structured trade-finance transactions.”

Simon Lay, London Forfaiting