Trade Debt Restructuring in International Trade Finance Operations in context of corporate and institutional relationships.

Moscow - Thursday 17th and Friday 18th November 2011

Yekaterinburg - Monday 21st and Tuesday 22nd November 2011

Introduction

Trade Finance is generally considered to involve less risk than other mainstream forms of bank financing. Traditionally banks have had very low defaults and loss provisions when providing finance that is underpinned by genuine trade related shipments of goods.

The financial crisis that engulfed the World financial markets also had an impact on trade obligations of the corporate and banking sectors. When compared to other forms of finance, trade finance has faired well and the need to restructure trade obligations has been comparatively low. However, there have been incidence of default and the need to understand the nature of such defaults and to gain the professional skills to manage and restructure trade obligations is now of great importance.

This workshop will focus on practical approaches to restructuring trade related debt obligations for both the corporate and institutional relationships:

 The background and impact of the financial crisis on trade finance will be outlined in detail.
 Key terminology and definitions in the context of trade finance restructuring will be explained in practical terms.
 Case-studies examining the nature of defaults in the corporate and institutional relationships will be presented to illustrate the key issues in relation to dispute resolution and restructuring trade obligations.
 Real life trade related cases and events that transpired over the past two will be referenced and steps taken to minimise loss will be explained.

This workshop will be delivered in English without interpretation.

This workshop will be of benefit to participating bank staff in documentary operations, trade finance or structured finance and risk management departments. The workshop will be of value to staff working in credit departments or involved in trade related business development or assessment.

Venue: Central and convenient location in centre of Moscow and Yekaterinburg Participants will be notified of venue address closer to the event.

PLEASE SPECIFY WHICH VENUE YOU WISH TO SEND NOMINEES (max 2-3 each venue).

Duration: Two day workshop from 09.30 until 16.30 each day

All successful participants will be awarded certificates by the EBRD at the workshop evening dinner reception.

All meals and materials provided complimentary.

Contents

Day One – Restructuring Trade in context of Corporate Relationships

Session 1 (09.30 –10.00) - Introduction and scope of workshop

(i) Introduction of tutors.
(ii) Introduction of participants.
(iii) Objectives of workshop.
(iv) Outline of case-study methodology to be used during workshop.

Session 2 – (10.00 – 10.50) – Trade finance data and emerging trends 2007 - 2010

(i) Patterns in World Trade.
(ii) Trends in SWIFT messaging for trade – volumes and values
(iii) Key findings of ICC Global Survey on Trade Finance 2010 in terms of disputes, defaults and operational issues.

Case Study – key definitions for default and restructuring in trade finance facilities.

-----------------Coffee Break – (10.50 – 11.15)------------------------

Session 3 – (11.15 – 12.30) Trade finance structures, rules and obligations

(i) The trade cycle explained
(ii) Documentary Letters of Credit (key aspects of UCP600, ISBP)
(iii) Documentary Collections, Bankers Acceptances, Avalised Drafts (URC 522)
(iv) Guarantees – Direct and Indirect through correspondent banks
(v) Standby Letters of Credit as backup to loans and trade obligations

Case Study – identification of risk elements in various documentary trade products.

------------------------Lunch Break – (12.30– 13.30)----------------------

Session 4 – (13.30 – 14.45) Default and restructuring issues surrounding corporates

The afternoon sessions on day one will be driven predominantly by case studies involving identification of steps to be taken in pre and post default situations and explore how to restructure transactions in the event of counterparty not being in a position to perform their obligations.

 Impossibility of importer to perform – is refusal correct?
The issues affecting the importers ability to perform will be analyzed based on a simulation of a real life case. The steps to be taken in a pre-default situation will be outlined and participants will suggest alternative approaches to solving such problems. The consequences for a bank in not taken actions will be explained.
 Impossibility of exporter to perform – claim or not?
A case will be presented where the exporter is not in a position to perform directly due to the consequences of the financial crisis. The participants will be presented with various action options that may be taken and they will determine the optimum approach to manage the risk and at the same time support the customer.

------------------Coffee Break – (14.45 – 15.10)------------------------------

 Contractual dispute between exporter and importer and bank implications
With the collapse of commodity prices during the financial crisis there was an upsurge in the number of disputes between exporters and importers who had entered into firm contracts supported by bank documentary obligations. A real life case study will be presented to the participants and the actual actions taken to resolve the core issues will subsequently be revealed.

Session 5 – (16.00 – 16.30) Summary, Questions and Answers

Close of Day One

Day Two – Restructuring Trade in context of Institutional Relationships

Session 6 - (09.30 –1 0.00 – Summary of day one and outline of issues concerning institutional relationships to be covered in day two

(i) Summary of topics covered and conclusions achieved in day one
(ii) Outline of objectives, content and scope of day two of workshop

Session 7 – (10.00 – 10.50) – Background and nature of institutional defaults

(i) Definition of intuitional default
(ii) Perspective on historic occurrence of institutional trade defaults
(iii) Overview of experience of major western bank with extensive trade finance related lines
(iv) Country specific issues in countries of former Soviet Union
(v) The reality of prioritizing trade debts during country defaults

Case Study – specific country approach to prioritizing trade debt obligations.

-----------------Coffee Break – (10.50 – 11.15)------------------------

Session 8 – (11.15 – 12.30) Institutional Risk Management

(i) Extensions in maturity dates – operational and legal issues.
(ii) Pre and post default measures
- re-financing , stand still agreements, collateral control and evaluation
- structured and synthetic trade deals
- workflow and cashflow

Case Study – default under structured trade finance product and implications for trade finance markets.

------------------------Lunch Break – (12.30– 13.30)----------------------

Session 9 – (13.30 – 14.45) Default and restructuring in institutional relationships

The afternoon sessions on day two will be driven predominantly by case studies involving identification of steps to be taken in a pre and pot default situations and how to restructure transactions in the event of the institutional counterparts not being in a position to perform their obligations.

 Defaulting institutions obligations taken over by another institution
A real life case will be presented where a bank has failed to honour genuine trade related obligations assumed under international rules. Will another bank taking over part, or all the lines of business of the defaulting institution assume the full obligations to eventually settle earlier defaulted transactions.
 How the EBRD trade facilitation programme deals with an event of default
The number of defaults in trade transactions initiated by issuing banks has been minimal. However, there has been a number of defaults and the EBRD TFP has proven to be a valuable trade support tool in such situations. In this session a simulation of a real case will be presented to outline the actions taken, the implications for parties involved as well as the final outcome.

------------------Coffee Break – (14.45 – 15.10)------------------------------

Session 10 – (15.10 – 16.00) Technical aspects to trade disputes and restructuring

(i) Irrevocable Reimbursement Undertakings (IRU’s)
(ii) Trade Dispute Resolution Options
(iii) The role of Credit Rating Agencies
(iv) DOCDEX – an overview
(v) Outlook for future transactions

Session 12 – (16.00– 16.30) Summary, Questions and Answers

Close of Day Two

The Facilitator

Mr. Vincent O'Brien is a highly experienced practitioner of International Trade Finance being a long-standing member of the ICC Banking Commission. He has more than 20 years international trade banking experience and has delivered trade finance technical assistance and training in more than 70 countries worldwide.

He has participated in dispute resolution exercises and has acted as an expert witness in major trade related legal disputes.

Vincent is the ICC Banking Commission Representative to the World Trade Organisation (WTO) Expert Group on the Financial Crisis and he was recently appointed Chair of the ICC Banking Commission Market Intelligence Group.

Participants may send the facilitator questions in advance in connection with disputes, structuring or restructuring trade finance transactions or structures to: vob@ebsi.ie

Workshop Materials

All participants will be provided with

 Comprehensive Printed Manual
 EBRD Notepad and Pen
 All case study materials
 USB Memory Stick containing all electronic presentations to facilitate internal bank presentations

This project has been originated by EBRD and supported by various countries through the EBRD – Western Balkans Fund and the EBRD Shareholder Special Fund

Source: FACTORing PRO