INTESA SODITIC
An Investors Guide to Forfaiting

WHAT TYPE OF TRANSACTIONS CAN BE FINANCED THIS WAY?

Intesa Soditic Trade Finance Limited has the ability to provide trade finance for various aspects of international trade, the most common being:

  • EXPORT FINANCING
  • PRE-EXPORT FINANCING
  • IMPORT FINANCING
  • REFINANCING 15% DOWNPAYMENT portion of Export Credit Agency credits.
  • CROSS BORDER LEASE RECEIVABLES - (discounting of)
  • WORKING CAPITAL
RISKS ASSUMED BY THE INVESTOR
  • COUNTRY RISK - i.e. political or economic problems preventing payment at maturity being made abroad. This is the same risk one would assume when buying syndicated loans or CD's, however the risk is mitigated by the fact that:
  1. Where necessary, foreign exchange approvals are obtained and
  2. Historically, trade paper has been treated more favourably than other forms of debt during most re-schedulings.
  • GUARANTOR RISK - i.e. the risk that the bank fails/defaults prior to maturity. Again this is the same risk one would assume if investing in similar syndicated loans or CD's.
ATTRACTIONS OF INVESTING IN TRADE PAPER
  • LESS RISKY than comparable financial debt:
 "Self-liquidating" transactions - tangible assets which can easily be liquidated.
Bank obligations (either direct or guaranteed) - simplifies credit process and enhances credit standing of the obligation.
"Dual obligation" - the obligor still remains liable even in the event of the guarantor not meeting the payment at maturity, since the investor still has 100% recourse to the obligor.
Common sense - borrowers will, if necessary divert financial resources from other areas to ensure continuing ability to trade.
  • ATTRACTIVE YIELD - yield tends to exceed that available on the syndicated loan market for comparable risk and maturities.
  • EASE AND SIMPLICITY OF DOCUMENTATION - allows for speedy conclusion of transactions from initial offer stage to booking of asset on investor's books.
  • OPTIMUM USE OF CREDIT LINES - non-utilised credit lines can be quickly filled by assets with attractive yields.
  • TENOR TO SUIT PORTFOLIO REQUIREMENTS - assets available from short term (60 - 360 days) to medium term (1 - 5 years).
  • LIQUID ASSETS - the secondary market in trade paper is sufficiently developed to enable investors to easily free up their credit lines if necessary.