Oil Trader Trafigura Wins Better Rates on $5.5 Billion Financing

  • Commodity trader signs $5.1 billion revolving credit facility
  • Trafigura signs $413 million Samurai loan with Japanese banks

Trafigura Group Pte. lowered its borrowing rate as the commodity trader raised $5.5 billion in bank financing amid record industry profits from oil trading.

A European revolving credit facility totaled $5.1 billion, including a one-year tranche for $1.91 billion and a three-year for $3.19 billion, the Singapore-based company said Thursday in a statement. Trafigura, which has major trading operations in Geneva, also closed a three-year 46 billion-yen ($413 million) loan, almost double the size of its previous Samurai credit in 2014.

“We’ve met our target of raising collectively over $5.5 billion at a tighter price, a more than adequate sum to finance company operations in current market conditions,” Chief Financial Officer Christophe Salmon said in the statement.

Trade finance is the lifeblood of the commodity-trading sector which needs short-term capital from banks to fund the business of moving physical stocks of oil, metals and other raw materials around the world. Against a backdrop of record profits from oil trading and reduced financing needs due to lower commodity prices, traders including Trafigura and Vitol Group are winning improved lending terms.

Rosneft Volumes

Lifting increased volumes from Russia’s Rosneft OAO has propelled Trafigura to become the world’s second-largest independent oil trader, handling close to 4 million barrels a day. That trails Vitol which handles more than 6 million barrels a day.

Trafigura said in December that gross profit for its oil trading division soared 50 percent to a record $1.7 billion in the 12 months through September. Vitol posted net income in the first nine months of 2015 of $1.25 billion, up 59 percent from the same period in 2014, according to a person familiar with the company’s accounts.

Oil traders are filling storage tanks and profiting from a market structure called contango that allows them to store oil to sell later at higher prices. They are also benefiting from price volatility and arbitrage opportunities between geographical markets.

Gunvor Group, another top independent oil trader, announced record profit of $1.25 billion this week, due to Russian asset sales and strong results from its oil-trading unit.

Trafigura will use the credit facility to refinance the $5.3 billion it raised last year and for general corporate purposes, the company said. Lead arrangers and bookrunners included Lloyds Bank Plc, Societe Generale SA, UniCredit SpA, ING Bank NV, Royal Bank of Scotland Plc and Rabobank, with 45 banks participating.

Bank of Tokyo-Mitsubishi UFJ and Mizuho Bank were lead arrangers for the Samurai loan, which was supported by 12 Japanese financial institutions.

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