International commodities trading company Trafigura plans to issue another $300 million of bonds backed by trade receivables via its Trafigura Securitisation Finance Plc shelf.
The notes will be backed by a revolving pool of short-term (less than one month, on average) receivables generated from the sale of crude oil, oil products, non-ferrous metals, non-ferrous metal concentrates, iron ore, coal and refined metals.
The collateral has performed strongly since the first notes were issued in 2007, with average default, delinquency (defined as four weeks past due) and dilution rates both well below 0.2%, according to Moody’s Investors Service, which is rating the deal.
“The receivables within the transaction often benefit from letters of credit provided by third -party banks and therefore the portfolio credit risk is not only on the receivable's original debtor but also on a small number of typically highly rated banks,” Moody’s presale report states.
Four tranches of notes will be issued, all of them due in December 2020. Two senior tranches, one paying a fixed rate of interest and one floating-rate, are each sized at $139.5 million and rated Aaa. There is also a pair of subordinate tranches, one fixed-rate and one floating-rate, sized at $10.5 million each and rated Baa2.
In addition the credit quality and historical performance of the portfolio, the transaction benefits from dynamic over-collateralization, with a floor of 15% for the senior notes and 9% for the subordinate notes. Moody’s also cited Trafigura’s ability to service the portfolio and the appointment of Sociéte Générale as back-up servicer and matching agent.
Among the more notable risks to the deal, according to the rating agency, is a relatively high debtor concentration with top 20 final debtors accounting for 58% of the receivables balance. There is also a relatively high industry concentration, as historically at least half of the debtors were financial institutions and the remainder mainly companies active in the oil sector. Also, up to 30% of debtors are unrated or rated below investment grade, and 25% of the debtors could be located in countries with foreign currency rating between Ba1 and B3.