Gunvor Group Ltd., an oil trader co-owned by billionaire Gennady Timchenko, agreed to a 225 million-euro ($299 million) deal to sell receivables to GE Capital that will be used to fund the company’s German refining business.
“We put a lot of emphasis on our financing policy to widen our funding sources as much as possible, especially outside the usual banks we are working with,” Mathieu Coolen, Gunvor’s head of structured finance, said today in an interview from Geneva.
The transaction is part of a wider strategy being employed by Gunvor and other commodity traders to diversify trade finance sources beyond traditional banks. Gunvor, Cyprus-registered and with major trading operations in Geneva, sold $500 million of five-year bonds in May, up from an initial $300 million plan.
Selling receivables to a third-party is known as factoring and the deal with GE Capital represents the largest single receivables finance program in Germany, both companies said in separate statements. Gunvor was founded in 2000 to trade Russian crude and is among the five-largest oil traders in the world.
Factoring deals, common elsewhere, aren’t usually employed by commodity trading houses, which require large amounts of capital to fund operations. “To the best of our knowledge, this is the first of its kind in the trading industry,” Coolen said.
The GE Capital deal will reduce Gunvor’s need for trade financing for its German operations by 33 percent to 50 percent, he said by phone. Traditional bank financing will still provide most of Gunvor’s total capital requirements, said Coolen.
The company is considering at least two other non-bank financing models in addition to corporate bonds and factoring, he said, without giving details of those plans.
Gunvor bought two refineries in 2012 in Antwerp, Belgium, and Ingolstadt, Germany. Founder and Chief Executive Officer Torbjorn Tornqvist said in January that Gunvor planned to build more refineries and was seeking investments outside of Russia.
Mercuria Energy Trading SA, a Geneva-based oil trader, also plans to diversify beyond traditional bank financing, Benoit Lioud, a spokesman for the company, said in an interview.
“It is important to diversify our financing tools,” said Lioud. “It is also reflective of the changing commodity world as well. It is important to have flexibility in financing through various sources.”
To contact the reporter on this story: Andy Hoffman in Geneva at firstname.lastname@example.org