Capetra | Disciplined Investment

Characteristics and Assessments
Country at risk - Ghana	Credit rating, historic treatment of trade flows, importance of sector to the country, and currency convertibility considered.
Underlying Goods - Ghana Cocoa Beans & Cocoa Takeover Receipts issued by Ghana Cocoa Board (COCOBOD)	Strategic priority, critical imports, foreign currency earner, macro sector themes, liquidity, and tax/tariff issues assessed.
Original Tenor / Tenor from purchase - 12 months	Grace period, amortisation schedule, drawings, conditions, and financing structure thoroughly reviewed.
Deal Pricing - Net 6% after fees (Confidential)	Relative value of spreads to market, value for risk, and return projections carefully considered.
Applicant - Licensed Buying Company passed due diligence. Classic letter of credit facility, applicant buys cocoa from local farmers.	A thorough review of the obligor, including credit analysis, shareholders, market position, access to capital markets, and quality of audit/accounting firm.
Transaction Type - Trade Finance Facility	Evaluated under the following mitigants: production, operational, and payment issues.

Key Investment Considerations

Portfolio: The tenor, yield target, and concentration of the Trade Finance portfolio are carefully considered by region, country, sector, and obligor structure.
Commodity price, ESG factors, country, and legal documentation examined closely.
In this case, the pre-financing will be available to a minimum of four individual LBCs at a maximum limit of 30% of total financing available for any single LBC.

Risks and Mitigants
Credit Risk	The risk occurs if the applicant is not able or willing to pay upon maturity. Deal structured over two continuous logistic cycles. Each cycle lasts over a six-month period, from cash disbursement to return of principal. A margin of safety timeline buffer is built into the repayment cycle as a hedge against risk (if any), of delayed payments from COCOBOD. COCOBOD has never defaulted in 27 years borrowing at circa 1.75% on pre-season sales e.g. to Kraft, Mars, Nestle, Hershey's, and Ferrero.
Country Risk	The borrower is based in Ghana, and underlying goods are locally sourced. Ghana’s economy is stable and does not affect the viability of the transaction. Cocoa is the mainstay and a major source of foreign exchange. Government through COCOBOD has a buying monopoly and is in its 28th year of annual pre-export financing of Ghana’s cocoa harvest. To date, has never paid late. There is no exposure to local currency.
Performance Risk	Fake documents may be produced and presented – experienced PMs working closely with Compliance and Legal oversight. Non-delivery, goods received of inferior quality and exchange rate risk. The facility will only be available to LBCs using reputable collateral managers. The LBCs will purchase a performance guarantee from a reputable insurance company and assign loss payee status to the Trade Finance SPV. First-class inspection companies.
Market Risk	The very short-term tenor (2 x 180 days) is a mitigant to long-term concerns. Maturities do not exceed the cocoa-growing season. Margin is fixed in a monopolistic market. Release of funds requires a currency swap to be in place as a pre-condition for LBC financing, ringfencing USD to the benefit of the custodian bank. The loans are self-amortising as payments from each delivery throughout the loan's tenor are used to pay interest and amortise the principal.
Legal Risk	SPV executes a BAFT Master Participation Agreement (MPA) with each LBC addressing risk transfer, compliance requirements, and enforceability. Funds are only released upon confirmation that the cocoa is lodged at the depot. Two layers of collateral: Underlying goods covered from loss and damage by insurance. Performance guarantees are assigned to SPV; and Landed properties - whereby SPV possesses assigned title from the borrower before execution. Overcollateralisation at 120%.

EXAMPLE PORTFOLIO SNAPSHOT

Investment Characteristics and Portfolio Limits
.	Concentration Parameters	Upper Limits
Currency	United States Dollar Other liquid currencies Illiquid currencies	100% 15% 0%
Maturity	Maximum weighted avg. life: Portfolio Maximum life: Single name exposure	360 days 720 days
Deal specific	Exposure to any single obligor	Higher of 20% NAV / $15m
Geographic (based on country of risk)	Maximum exposure to OECD Maximum exposure to non-OECD	100% 80%
Regional	Asia Eastern Europe Latin America Middle East and North Africa Sub-Saharan Africa	60% 50% 40% 40%
Industry	Transactions with a single commodity as the underlying good	25%
Risk retention	Minimum risk retention of the counterparty/obligor in any single transaction	10%
Country risk exposure*	AAA+ to A BBB+ to BBB- BB+ to BB- B+ to B- Sub B-	100% 100% 50% 30% 10%
Prohibited goods	Tobacco, alcohol, and gambling	0%

*Based on the highest long-term foreign currency issuer default rating awarded by S&P, Moody's, or Fitch.
*Where deals are insured, the domicile of the insurer and its relevant credit rating shall apply.

SOURCE: CAPETRA GLOBAL CONSULTING LTD., REPRESENTATIVE SEGREGATED GLOBAL TRADE FINANCE ACCOUNT

DISCIPLINED INVESTMENT APPROACH

Key Investment Considerations

EXAMPLE PORTFOLIO SNAPSHOT

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