Trade and commodity finance—key documentation trends

Trade and commodity finance—key documentation trends

In an age old industry witnessing a rise in new players, how can lawyers and institutions ensure they stay ahead of challenges and opportunities in trade and commodity finance? Richard Usher, partner at DLA Piper, outlines the potential for closer engagement with the needs of customers, and so too the importance of making effective use of due diligence.

What are the key documentation trends in trade and commodity finance at the moment?

At one level, nothing new—financiers are still providing finance to borrowers for a variety of transactions and we see the traditional forms of security being requested and provided over the goods.

At the same time there are nuanced variations on the old themes as financiers and borrowers look to differentiate themselves. As we conclude in the final question, we are seeing ever more comprehensive due diligence being requested by financiers before they agree to fund transactions, especially where goods are located in jurisdictions perceived to be high risk, and certainly before they consider entering into repo structures.

We see the so called challenger banks and independent finance companies offering generally quite vanilla trade finance structures, but either to smaller customers who would not require the size of facility to interest the larger banks, or who are looking to finance in jurisdictions where the larger banks’ risk committees are perhaps a little reticent to fund. This is perhaps not so much a trend in documentation as a trend in the nature of finance providers.

In the bunkering world, we have acted for banks using receivables financing as a means of funding bunker companies rather than the traditional finance methods. This is as a result of the OW Bunkers case (PST Energy 7 Shipping LLC and another v OW Bunker Malta Ltd and another [2016] All ER (D) 75 (May)) in which, as a result of the combination of retention of title clauses and the ultimate right of the vessel to burn the bunkers prior to title passing, the Sale of

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About the author:

Meet Suzanna:

1. Banking and finance lawyer with experience in real estate finance, trade finance and aviation finance

2. Likes skiing, comedy shows and listening to live music

3. Thinks the law is not for the fainthearted

Suzanna has wide-ranging experience in banking and finance transactions with particular emphasis on advising lenders in the context of real estate finance and trade finance, and advising on ECA supported aviation finance transactions. Suzanna qualified as a solicitor in 2001 with Theodore Goddard (now Addleshaw Goddard LLP) and has since gained experience with Barclays Bank PLC, ECGD and Crédit Agricole CIB before joining LexisNexis.