Synthesis Bond Presentation Synthesis Bond Presentation * * * * - - PowerPoint PPT Presentation
Synthesis Bond Presentation Synthesis Bond Presentation * * * * * * Bond Issuance 6.50% p.a. indicative rate in USD (Swap equivalent level in EUR and GBP: indicatively 5% p.a. in EUR and 5.50% p.a. in GBP) For a 2yr Issue from a
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6.50% p.a. indicative rate in USD (Swap equivalent level in EUR and GBP: indicatively 5% p.a. in EUR and 5.50% p.a. in GBP)
For a 2yr Issue
from a USD500mio Note Issuance Programme
Listed in Luxembourg
A strategic way for bond investors to obtain a high yield return from a diversied trade nance portfolio A strategic way for bond investors to obtain a high yield return from a diversied trade nance portfolio All underlying transactions are synthetic investment grade due to the use of A- or better rated credit insurance and letters of credit and have a maximum tenor of 124 days All underlying transactions are synthetic investment grade due to the use of A- or better rated credit insurance and letters of credit and have a maximum tenor of 124 days Strong origination team with extensive experience across markets Strong origination team with extensive experience across markets Bankruptcy-remote SPV structure ring-fences the excess spread to provide additional protection for investors Bankruptcy-remote SPV structure ring-fences the excess spread to provide additional protection for investors
Our business model is similar to nancing that has been carried on for centuries. We provide funding for companies who have strong business models but need
We are not a lender in a traditional manner and we do not provide loans to companies. All funding that we provide is repaid upon completion of the transaction and our exposure ends at that point.
Most of the transactions that we nance are the simple sales of goods to end buyers. In this case, we are bridging the time gap between dispatch of the goods by the supplier, and receipt by the buyer. W e pay the seller directly, we take ownership of the goods until receipt, and collect sales proceeds directly from the buyer.
Where letter of credit or credit insurance is not feasible or customary we would require that nal buyer pays through Cash Against Documents arrangement plus payment guarantee/performance bond.
Synthesis Trade Finance II SA Bond Issuance Listed on the Luxembourg Stock Exchange Available for trading on the Euro-MTF market Deliverable in Euroclear, Clearstream and CREST The notes will be : The proceeds of the notes will be used to nance short-dated, secured, trade nance transactions to a diverse pool of clients. Every transaction will have either a Letter of Credit or Credit Insurance backing it, as well as appropriate legal charges over the nanced goods. The underlying transactions will have no market risk because they are nancing existing back-to-back contracts. The goods themselves will primarily be commodities. The transactions will be originated by Synthesis Structured Commodity Trade Finance Limited and purchased by Synthesis Trade Finance IISA. This document gives an overview of the planned issuance programme.
Stock Exchange listed Stock Exchange listed Locked Locked
What is Structured Trade Finance? Structured trade nance is where a nance company funds a transaction on behalf of a third party. In our case we achieve this by directly purchasing the goods from their supplier and then selling the goods directly to their purchaser, instantly removing a substantial portionof the creditrisk. The advantage for investors is that trade nance portfolios : Are self-liquidating
Trade nance transactions are typically 30-60 days so there is a clear exit path for the funder. It also allows funders to quickly reduce exposure to borrowers, sectors and geographies
Have strong returns
Typically trade nance transactions have very strong returns due to the short tenor. By eciently keeping money deployed, this can be converted to strong annualised returns
Have strong security
The funder generally has direct ownership or a charge over the assets being nanced as well as access to a Letter of Credit or Credit Insurance
Have low default rates
Historically, structured trade nance transactions have very low default rates and very strong recovery rates, thanks tothe strong asset security
Self-Liquidating Self-Liquidating Strong Returns Strong Returns Enhanced Security Enhanced Security Low Default Rates Low Default Rates
Structured Trade Finance in numbers * http://iccreport2015
Product Total Exposure($mio) Total DefaultedExposure ($mio) Exposure-weighted Default Rate Transaction Default Rate Export L/C 988,434 235 0.02% 0.01% ImportL/C 1,656,528 1,210 0.07% 0.08% Performance Guarantees 1,023,561 1,154 0.11% 0.17% Loans forImport/Export 3,154,407 5,323 0.17% 0.22%
Despite global economic uncertainty, global trade continues to grow year-on-year as globalisation continues $6 trillion WTO Member Exports per year SMEs continue to globalise, moving their goods in greater size, across greater distances >50% SME share ofthat trade However, as deliveries take longer, SMEs turn to trade nance to bridge the cashow gap between production and payment 80% Of the SME share requires trade nance According to the International Chamber of Commerce Report in 2011, default rates in trade nance stood at around 0.02% - better than investment gradebonds* 0.02% Is the historical default rate
With the phased implementation of Basel III and tighter lending criteria from banks, many SMEs have lost access to the funding that they previously had. Banks are reducing exposure due to High regulatory costs of capital Out-dated technology and KYC infrastructure A reluctance to lend on a transactional basis The Global Financial Crisis created a gap With banks less willing to lend to SMEs an opportunity has been created for smaller, more nimble nancial organisations to enter the market. Using a combination of experience and understanding of global trade ows, a new breed of trade nance houses is emerging who can lend based upon assets, increasing security whilst maintaining strong returns.
How do we choose our clients? Here at Synthesis, a large part of our success within the group comes from working exclusively with borrowers who have a strong track record in their industry. We look for a minimum of three years of successful trading by the management team and a strong business model with good margins across their product range.
In Structured Trade Finance the key to a successful portfolio is not just to choose the right counterparties, but also to select the deals with the right characteristics. Each commodity has its own idiosyncrasies, but in all transactions we seek verication of the value of the goods and will, where possible, take a charge over the goods. In the event of non-payment, we would liquidate the assets, hence our preference for non- perishable, generic commodities. Underlying asset The underlying asset must be something that we can take control
perishable Credit Enhancement The transactions that we nance are always backed by a Letter of Credit or Credit insurance from an investment grade counterparty, or by alternative arrangements ensuring prompt and secure payment by the customer (performance bonds, payment guarantees) Loan-to-value Typically we look at a “real” valuation of the asset in terms of what price it can be sold at in a variety of jurisdictions Monitoring Are we able to identify, monitor and exercise control over the asset at any point during the transaction?
RISK FACTOR RISK MITIGANT Risk of non-payment Synthesis only lends to companies or management teams with a significant track record in the relevant commodity Both the arranger of the deal and the debtor are required to pass our KYC process Each transaction will have in place a Letter of Credit or Credit Insurance to act as a safeguard" Risk of rejection of goods "Goods are checked for quality where necessary and certified by an independent inspector before the transaction is funded Country Risk In conjunction with leading trade finance law firm Watson Farley & Williams, Synthesis – Structured Commodity Trade Finance Limited continually monitors any potential risks, in particular those relating to currency restrictions, sanctions or embargoes" Commodity Price Risk Synthesis – Structured Commodity Trade Finance Limited does not engage in transactions where the return is in any way linked to the price of the underlying
In the event of non-payment by a borrower, Synthesis - Structured Commodity Trade Finance Limited would first look to enforce the terms of the contract. It would then seek to sell the commodity to another buyer. It is only after that that they would seek recovery through the Letter of Credit or Credit Insurance. By concentrating on fungible, hard commodities, the risk of depreciation of the asset is minimised" Risk of Documentary Failure Facility Documentation is arranged by WFW and all transactions are documented by experienced professionals"
Worked Example Worked Example Purchase cost of the goods : USD100 Purchase cost of the goods : USD100 Contribution by the Contribution by the Client : USD10 Client : USD10 Contribution by Synthesis :USD90 Contribution by Synthesis :USD90 Sales Revenue of the goods : USD105 Sales Revenue of the goods : USD105 Returned to Returned to Synthesis : USD92 Synthesis : USD92 Returned to Client : USD13 Returned to Client : USD13 Marine Insurance during transit : Typically Marine Insurance during transit : Typically 110%of 110%of purchase price (USD110) with purchase price (USD110) with Synthesis as rst loss Synthesis as rst loss payee payee Credit Insurance before payment : Typically Credit Insurance before payment : Typically 90% of sale 90% of sale price (USD94.5) with Synthesis as price (USD94.5) with Synthesis as rst loss payee (note rst loss payee (note
USD90)
Examples of products that we will help to fund
OIL AND ENERGY PRODUCTS
e.g. petro l,aviation fuel With buoyant consumption of oil products around the world and long delivery times, there is continual demand for funding
AGRICULTURAL PRODUCE
e.g. grains and beans Agricultural goods are often seasonal which makesit harder for small companies to raise
can seek out mutualy benecial relationships
INDUSTRIAL COMMODITIES
e.g. polymers, metals Metals and polymers are businesses that often have regular contracts that allow us to remain well invested by continually moving money from
SEMI-FINISHED OR FINISHED GOODS
e.g. branded pharmaceuticals WA proportion of our portfolio may be used to nancenon- commodities as long as the margins are strong and the products are generic and liquid
Pari passu All bonds issued with the same maturity date are pari passu and senior secured Bankruptcy remote The SPV structure means that each issuer is independent of the
Excess spread Each Issuer retains its excess spread (the difference between where it borrows and where it invests), less management costs, to provide a buffer for investors.
As a securitisation vehicle, Synthesis Trade Finance I SA (STF I SA) has no ability to transact directly. This provides additional protection to investors because transactions are originated by a separate company with a separate decision making process (Synthesis Structured Commodity Trade Finance Ltd) and only purchased with the approval of the separate board of Synthesis Trade Finance SA.
This communication is being furnished solely on a condential basis to the recipient. This communication is directed at persons having professional experience in matters related to investments and any investment
with whom such investment activity can lawfully be engaged). If you do not have professional experience in matters relating to investments you should not rely on this communication. Neither this Communication nor any of the associated documents may be reproduced, re-transmitted or further distributed to any other person or published, in whole or in part, for any other purpose than that stated
having occurred which have not yet occurred at the date these documents are made available, but which are expected to occur prior to the publication of an approved prospectus in nal form. Recipients of this Communication (or any of the associated documents) who are considering purchasing or subscribing for Notes in any of the issuers are reminded that any such purchase or subscription must be made only on the basis of information contained in the approved prospectus its nal form, which may be different from the information contained in this document. Notes may not at this time be offered by any of the issuers directly to the public. Neither this Communication nor any of the attached documents constitutes an offer of Notes. By accepting delivery of this Communication, you agree to keep it and its content (including the attached documents) condential, and not copy, publish, distribute, pass on or disclose any of it except with the prior written consent of Synthesis. To the extent permitted by applicable law and regulation, Synthesis Trade Finance S.A. and its aliated companies expressly disclaims and excludes any and all liability that may be based on this communication and the attached documents, any errors in it/them or omissions from it/them.