By JENNY GROSS
LONDON -- Gunvor Group and the financial arm of General
Electric (GE) have agreed to a lending program that will back
part of the commodities giant's oil refinery in Germany, a
Gunvor official told The Wall Street Journal ahead of
The deal is one of the first instances of a commodity
trading house using "factoring," a lending tool, to finance refining operations, Gunvor
Large globe-straddling commodities houses, which are often
privately held and independent, are increasingly seeking new
financing sources in order to expand liquidity as they move
into owning physical assets like refineries, warehouses and
mines and as trading margins shrink.
In an interview Stefan Gallimore, Gunvor's structured
finance manager, said a 225 million euro ($299 million) program
had been agreed with GE Capital to insulate the Ingolstadt refinery from financial risk.
"This enables us to have available liquidity in able to pay
our suppliers," Mr. Gallimore said. "It's an important way to
be able to manage our risk."
Factoring, a type of financing, occurs frequently in the
banking sector. The deal means that when Gunvor sells products
from its Ingolstadt refinery, for example, it will sell
the invoice to GE Capital who can then reimburse Gunvor
immediately and take a small fee. This frees up cash for Gunvor
by enabling it to receive the payment immediately, rather than
wait for payments from the buyer of the product.
Mr. Gallimore said Gunvor was looking to use this type of
financing in future deals. This program is the biggest
receivable financing program in Germany.
Some of the world's largest commodities traders have
recently introduced other new financing tools. Trafigura in
April issued its first perpetual subordinated bond, raising
$500 million. The move followed a similar $350 million issue by
Louis Dreyfus last autumn.
As these companies increasingly snap up physical assets like
warehouses to service their businesses, capital expenditure has
increased. In turn this has pressured balance sheets just as
prices of many tradable commodities -- like metals and
agricultural crops -- have tumbled since the start of 2012.
Cyprus-registered Gunvor purchased Ingolstadt in 2012 after
the refinery's owner, Petroplus, filed for insolvency. The refinery serves markets in Germany
Dow Jones Newswires