Trafigura and Blackstone discuss equity investment of up to $3bn

Trafigura has held discussions with Blackstone about an fairness funding of as much as $3bn, because the privately owned commodity dealer seeks to broaden its sources of funding.

The talks between Trafigura and the world’s largest different asset supervisor come as commodity costs have soared following Russia’s invasion of Ukraine, rising pressures on the business.

Blackstone declined to touch upon the discussions, which individuals acquainted with the matter stated had ended and not using a deal.

In an announcement, Trafigura pointed to the appointment in March 2021 of Khodor Mattar, a former Temasek govt, to a newly created place of head of capital improvement as a part of a longer-term technique to diversify its sources of finance.

“We’ve got been constructing relationships with different suppliers of capital,” the corporate stated. “We recurrently interact with different capital suppliers on debt and fairness alternatives throughout the enterprise.” 

Huge commodity merchants sometimes depend on credit score strains from banks to finance the cargoes of uncooked supplies they purchase and promote. In Trafigura’s case it additionally faucets public debt markets and has a securitisation programme.

The funding necessities of the business have risen considerably for the reason that invasion of Ukraine, including to liquidity pressures.

Partially, that displays greater commodity costs, which have elevated the price of shopping for a cargo of liquefied pure fuel or filling a supertanker with crude oil, which at present costs stands at nearly $200mn.

However rising costs have additionally elevated the amount of money merchants have to pledge in opposition to the futures contracts they use to hedge long-term contracts and inventories.

Most merchants can not transfer bodily commodities from the place they’re produced to the place they’re consumed until they’re able to hedge their worth threat.

Commodity merchants and power majors with giant buying and selling arms have discovered themselves on the hook for enormous margin calls — calls for for further money from counterparties to cowl lossmaking hedging positions.

This was particularly acute earlier this month when benchmark fuel contracts in Europe greater than doubled in a few days, and final week when nickel doubled to greater than $100,000 a tonne in a single buying and selling session.

Final Tuesday, Trafigura secured a $1.2bn credit score line from a gaggle of banks together with Mizuho Financial institution, Société Générale, Sumitomo Mitsui Banking Company and UniCredit.

The power was arrange in simply 48 hours and is predicted to extend to $2bn as soon as syndication to a wider group of lenders has been accomplished.

On the time, Trafigura stated the brand new facility was wanted because it manages the unprecedented enhance in commodity costs because of the conflict in Ukraine.

Though funding necessities have elevated, bankers reckon the sector is making wholesome income from the availability disruptions and dislocations attributable to the battle. Nonetheless, to grasp these income they might want to have sufficient liquidity in place to ship the products to the end-consumer.

Final yr, Trafigura generated internet revenue of $3.1bn, nearly double the earlier yr’s $1.6bn, on income that rose 57 per cent to $231bn on the again of upper commodity costs and elevated buying and selling volumes.

That allowed the corporate at hand greater than $1bn to its prime executives and workers. On the finish of September, the corporate, which is personal and owned by 1,000 of its staff, had complete debt of $45bn 

The discussions between Trafigura and Blackstone had been first reported by Bloomberg.