BHP Billiton/Cargill

Highlight: Cargill and BHP Billiton ran a series of electronic-document presentations through essDOCS confirming letters of credit between RBS and Westpac.

BHP Billiton, Cargill, the Royal Bank of Scotland (RBS), Westpac Banking Corporation, and Minerva Marine conducted a series of electronic document-based letter of credit for an iron ore trade using ESSDocs’ CargoDocs.

The electronic presentation, first completed in August, was estimated to have helped the companies shave an average of approximately five days out of their transaction time. The deal also marks an expansion and wider adoption of bank neutral platforms for electronic bills of lading in iron trades.
It is the first live use of CargoDocs by BHP Billiton, as well as the first use of eUCP presentation using CargoDocs by RBS and Westpac. Both banks were able to agree on test run and get the system up and running within four months.

A series of six letters of credit were executed back and forth using electronic bill of lading under eUniversal Customs and Practice (eUCP) rules across multiple borders in just four days. All document presentations in the series were conducted over CargoDocs.

Typical of the series, an electronic bill of lading was drafted by BHP Billiton in Shanghai, and then approved, signed and issued on behalf of Minerva Marine by Wilhelmsen Ships Services in Port Hedland, Australia.

BHP Billiton created original electronic peripheral documents (such as commercial invoices, cargo manifests, and packing lists) with essDOCS’ CargoDocs and the whole electronic set was endorsed and presented electronically to RBS under an eUCP600 letter of credit. Once accepted, the electronic documents were transferred to Westpac over secured Internet channels, after which they were forwarded to the buyer, Cargill.

Westpac then transferred the e-docs to Cargill, completing the LC transaction in four days. All trade documents involved were presented electronically.

Bright Futures Educational Facilities Inc.

Highlight: An involved financial structure provided by Standard Chartered has allowed the construction company to build classrooms in the Philippines, while maintaining leverage ratios that will allow it to bid for new projects.

A consortium between the BF Corporation (BFC) and Riverbanks Development Corporation (RDC), Bright Futures Education Facilities Inc. (BFEFI) was formed so it could bid for a private-public partnership (PPP) project offered by the Philippines government.

After winning the bid, BFEFI was mandated to design and build 2,157 school classrooms in more than 700 locations in the Philippines as part of the PPP build-lease-transfer programme, where the government will buy the classrooms after 10 years.

Local banks were offering BFEFI term loan financing with healthy 11-year tenors, but the downside is that it would have badly impacted it leverage ratios, preventing it from winning similar business for at least six years.

Standard Chartered was chosen as the lender to provide $87.2 million secured multi-tranche financing facility to help BFEFI finance the construction. The funding consists of two-tranches:

A)    An invoice financing tranche to fund the classroom construction ($39 million/1.5 years).
B)    A non-recourse receivables purchasing where the proceeds of the receivables purchase are used to repay the invoice financing tranche by buying the lease receivables payable to BFEFI from the government ($48.2 million/7.5 years).

The facilities are secured against a parent guarantee from BFC; a pledge of BFC’s shares to BFEFI; mortgages from the BFEFI and BF Metal (a subcontractor); and assignments of project documents, related receivables of BFEFI and projects accounts by BFEFI, BFC, and BF Metal.

For Standard Chartered, the structure reduces its overall exposure on the contractors during the building phase because the invoice financing tranche will be paid out up to ten months from initial drawing through proceeds on the first purchase of lease receivables in the second tranche. The risk for the transaction moves to the Philippines’ government once it takes the classrooms and the lender has purchased the receivables.