If you were trying to scupper the career of an over-zealous colleague, this is the sort of financing mandate you might want to throw in their direction: first, make it a commodity deal (preferably not oil which is suddenly showing signs of revival); second, set the deal in a developing country, at a time when emerging markets are out of vogue, and local currency financing is scarce. Finally, throw in a little political difficulty, such as the arrest of a former president, which leads to fighting on the streets and the threat of trade sanctions.
Nobody is suggesting that Deutsche Bank's London-based international trade finance team is unpopular with its colleagues, but these are just a few of the elements which they had to overcome in a deal for Empresas Nacional de Minería (Enami) in Chile.
At the beginning of the year the state-owned copper, gold and silver mining company was looking for a pre-export financing facility of up to $60 million. Enami acts as an intermediary between Chilean mining producers and the international market. It is the official vehicle through which the government subsidizes small and medium-size mining companies. Even though copper prices remain weak and the Chilean peso was coming under pressure, the government was unwilling to give any explicit guarantees for further borrowing.
It is just the sort of deal that these days makes investment bankers very nervous. Not so trade financiers. Back in the days before emerging markets became the buzzwords of the 1990s, and every bank in the world seemed willing to underwrite deals at slim margins, trade financiers faced the challenge of structuring deals in difficult circumstances. With investment bankers on the retreat, trade financiers are pleased to get their old markets back.
One such player is Deutsche Bank's Luigi La Ferla, director of the bank's international trade finance team. "It's all about the structuring of a deal," says La Ferla. "For this you need experience and a sufficient margin. When rates got very low a few years' ago, we would not have had a chance with such a deal. Companies such as Enami would have been able to arrange large amounts of funding in the syndicated loans market through American and European banks."
This time around things are different. Commodity prices are low. Investor appetite for risk is even lower. The Deutsche Bank team made the deal short-term: it matures at the beginning of 2000. The debt comes in the form of short-term promissory notes, guaranteed by Enami. The coupon was Libor plus 0.75%, with a front fee depending on the size of the stake.
As it turned out not even the shenanigans surrounding the arrest of Augusto Pinochet, Chile's former president, were able to scupper the deal. Rupert Wright