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THE EXPERTS' VIEW |
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| May 2008 - Structured finance: a centre of excellence where our expertise and our advisory capability make the difference |
| "To combine, strengthen and capitalize on expertise" such is the objective of the organization set up by Jean-François Marchal, recently appointed Head of Calyon's Structured Finance Department. An opportunity to present the solutions that Calyon can offer in the area of structured finance, a business where its professionalism and innovation capability is matched by very few players in the market. |
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 Structured finance: an area of expertise
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In 2007, Calyon maintained and even improved its positions amongst the world's leaders in most structured finance areas, combining loans and advisory services. The bank has few peers matching this regularity and performance level. The needs of the market remain significant as they correspond to an economic reality, be it the construction of airport facilities in India, the maintenance of bridges in the USA or the renewal of a power station with an approximate life span of 30 years. This sustained demand is bolstered by both the improvement of the standard of living worldwide and changes in consumption habits.
Structured finance involves originating, structuring and financing large scale export transactions and investments, resting often on physical assets (aircraft, ships, office buildings and plants, commodities…) or complex and structured loans.
Transactions come under six categories: - export and trade finance,
- transactional commodities finance,
- project finance and structured commodities finance,
- real estate and lodging,
- aircraft and railway finance,
- shipping.
Export and Trade Finance
Calyon is active in the financing of capital goods exports and of certain investments abroad, mainly through export credits (buyer or supplier credits) guaranteed by public credit insurance agencies. Calyon also offers co-financings alongside multilateral financial institutions (IFC, EBRD, EIB…) or financial loans with or without private insurance coverage. It offers the possibility of processing and enhancing the security of fund flows in international trade operations. Organized as a worldwide business line, export credits are handled by almost 90 employees distributed among 3 areas of competence: one dedicated to importers, another dealing with exporters and the third specialized in negotiation and structuring.
Trade Finance is one of Calyon's core businesses. Its constant development is boosted by the following upsides: a commercial network of specialists located in almost 40 countries, a very comprehensive range of products, a substantial counterparty risk taking capacity, flexible and high security remote banking tools and on-line access to related financial services and lastly well proven advisory capacity (country risk approach, operations structuring, counterparty risk hedging strategy…).
Transactional commodities finance
Transactional commodities finance is geared to the large trading companies and international producers operating in the commodities markets. It offers short term financing and payment guarantee solutions related to the flows of commodities and semi finished products between the producers and the consumers. Based in Geneve, an actual worldwide centre of excellence, the business lines up a dedicated team of managers and a highly experienced documentary credit service.
Project finance and structured commodity finance
The natural resources, infrastructures and power sectoral expertise was consolidated last April into the same group (read the press release). The teams act for the same clients, using different financial techniques. This multi-product sectoral organization rationale reinforces a competence level which boosts advisory services and investment.
Calyon is amongst the world leaders in advisory services and in the arrangement of project finance. Seven international teams are distributed among the regional centres but are organized into an integrated business line. The business line's expertise encompasses the above areas plus public/private partnerships.
Calyon also offers everywhere worldwide structured finance whose repayment is provided by the proceeds from the export of commodities. This business line rests on the know-how of 25 employees specialized by geographical areas with assistance from the dedicated teams in the network in New York, Hong Kong and Moscow.
Real estate and Lodging
Distributed amongst 15 countries, 150 professionals are active in this business. Calyon's in-depth knowledge of property and lodging and of potential investors acquired over the years enables it to offer to its clients a broad spectrum of solutions, as well as the competence of its personnel in very diverse fields: advisory (M&A, development strategy…), debt instruments (corporate and structured finance, asset financing, syndication…), interest rate instruments (swaps and derivatives) and B/S and tax engineering (securitisation, B/S relieving operations…).
Shipping
Engaged in this area for thirty years, Calyon is amongst the top ranking banks in the world market. It finances a modern and diversified fleet of over 1,100 ships for an international customer base of ship-owners. Its portfolio totals EUR 11 bn as of end 2007. Calyon finances a very large variety of assets: diversified goods carriers (bulk carriers, tankers, gas tankers, container carriers, ro-ro ships…), passenger ships (liners, ferries), ships and floating equipment for the offshore oil industry.
The teams are based in Hong Kong, Athens, Oslo, Hamburg, London and Paris. In 2007 they continued to develop their activity in a highly competitive environment, arranging 108 new transactions for a total amount of EUR 6 bn.
Air and railway transportation
Active in this area for over 30 years now, Calyon is one of the world's leaders in aircraft finance. It finances aircraft (jets, commuter liners, freighters, business planes, cargo aircraft) operated by commercial airlines and offers its clients (passenger and cargo transportation companies, lessors, airports, industrialists) a broad range of products and expert services in liaison with Calyon's several product lines.
In 2007, it financed 120 more aircraft and expanded its capital market activities dedicated to customers: airlines, leasing companies and airports. It participated to a dozen capital market transactions and several project finance operations relative to the construction of airports. Several of the asset finance operations it structured won an award.
Already established in railway financing in the USA, Calyon recently extended to Europe its offering of asset based structured products geared to lessors of rolling stock and to freight and passengers railway operators.
Export Finance: a good set of relations and a perfect coordination between the business line teams at HO, in Italy and in Turkey enable Calyon to co-lead manage a EUR 450 million facility in favour or Türk Otomobil Fabrikasi AS | |
"The excellent commercial relations between Fiat and TOFAS and all the Crédit Agricole s.a. Group's business lines in France, Italy and Turkey as well as the interaction of our local teams in these three countries permitted to structure this large export finance transaction" says Caroline Mouly, Export Finance, the transaction's coordinator.
Last March, Calyon alongside Société Générale, Fortis, ING, Intesa SanPaolo structured a EUR 450 million loan for Türk Otomobil Fabrikasi AS (TOFAS). This loan will finance the erection, in the Bursa plant, of a new assembly line for small utility vehicles with an annual output capacity of 120,000 vehicles. The CUVs are to be sold on the European, Turkish and Middle East market under the FIAT name. Calyon acts as agent for the Sace tranche.
"The coordination of efforts from teams located in different countries is our leading asset in the performance of complex export transactions" underlines Henri d'Ambrières, Head of Export finance. "Our strength lies in the know-how and the sharing of past experience of our expert team in Paris, of the relations built by our local teams with our exporting customers and with the credit insurance agencies, on the one hand, and with our borrowing customers, on the other. In this transaction, the relations with the FIAT group and SACE in Italy and with TOFAS and the KOC group, a TOFAS shareholder alongside FIAT, in Turkey were essential".
"Our second upside is our ability to innovate in the combination of our products" he added. "Because of our adaptability we were capable to transpose our experience from one country to another. So, for the first time in Turkey, the financial structure combined a buyer credit with a loan from the EIB."
To find out more, read the
press release.
The Structured Commodity Finance team
structures a unique project in Mozambique | |
Calyon's Structured Commodity Finance team structured a landmark transaction in November 2007: it financed the acquisition of Hidroeléctrica de Cahora Bassa (HCB) by the Government of Mozambique.
The amount, the prepayment financing and the term of the credit granted in connection with this operation make it a first of its kind for Calyon. The Bank received a Lead Arranger mandate to structure, underwrite and syndicate a USD 800 million credit for an unprecedented period of 10 years for the benefit of the Government of Mozambique, with a Portuguese Bank.
The first South African Rand (ZAR) denominated prepayment financing operation of this size in the field of energy in Mozambique, this project mobilized the efforts of the entire Structured Commodity Finance team.
HCB, which operates the Cahora Bassa dam, the second largest dam in Africa, is now 85% controlled by the State of Mozambique with the remaining 15% being owned by Portugal.
South Africa is regularly affected by power failures. HCB has recently completed a separate refurbishment of the power station which will allow HCB to step up its generation capacity and deliver more electricity to ESKOM to cover the needs of the booming South African economy.
Project Finance: New York team closes a decisive deal in favour of Trinity Coal | |
In March, the Project Finance team in New York closed a deal that comforted Calyon's position as a reference player in coal mine financing in the USA.
Calyon acted as Sole Lead Arranger in a USD 335 million refinancing for Trinity Coal Corporation, a subsidiary of Denham Capital Management. Trinity Coal Corporation is a coal producer operating in West Virginia and Eastern Kentucky. The debt structure is a hybrid debt incorporating both project finance and corporate style terms and covenants.
Calyon's expertise and performance in that deal strengthened the long established relationship with the client and opened up other opportunities particularly in the dynamic coal sector. Calyon's willingness to underwrite the bank facilities for this transaction reflects our confidence in the structure, strategy and outlook of the company over the coming years.
Arranged in an unstable market environment, this transaction also proved Calyon's ability to adapt to difficult market conditions. After long term efforts by the Project Finance team, the deal successfully closed in March 2008.
Trinity is a low cost producer in the Central Appalachian ("CAPP") region due to its strategic concentration in surface mining and its innovative mining techniques that standardize and optimize the use of dozers in its operations.
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Soon online: the video of Structured Finance
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