RMB Awarded GTR Deal Of The Year Award – Africa
RMB Awarded GTR Deal Of The Year Award – Africa. RMB has been awarded the coveted GTR Deal of the Year Award (Africa) 2023 for South Africa’s Carbondardo Energy’s documentary credit facility. This facility enables the independent fuel trader to enhance its trading ability and cash flow effectiveness in an innovative way, without any balance sheet impact or need for additional layers of security typically associated with letters of credit (LCs).
Carbonardo Energy, which has been trading since 2011, purchases crude and petroleum products from a host of international suppliers, which it then imports into South Africa and sells to fuel majors. This practice typically requires a bank-issued documentary LC, which affords the purchasing traders the desired levels of comfort that payment will ultimately be made by the issuing bank. But the issuance of LCs generally requires advanced security, frequently in the form of cash, which many traders typically do not have – and even when they do, would prefer to use to further grow their business instead of ceding their working capital to a bank.
To ensure no negative balance sheet impact and fully contextualise RMB’s risk exposure a US$100mn revolving solution was formulated that required a rigorous process of understanding every detail of the supply and procure procedures, all the parties involved, shipping schedules, price calculations, delivery times and necessary documentation. The bank crucially also secured a payment undertaking from the ultimate buyers to mitigate the bank’s exposure. With this information , the bank was able to transfer the credit risk away from the trader to the offtaker, and issue an LC to the international supplier.
“This solution has allowed Carbonardo Energy to grow in its ability to import using larger cargoes while managing the volatile oil price spikes in recent times,” says Louis du Plessis, RMB’s head of trade finance. “Furthermore, the self-liquidating structure also allows the company to pay global suppliers with the inward funds of the offtakers, thus creating the potential not only to scale the solution but also allowing the offtaker to contribute to enterprise development.”
