The trade finance division of commodity trading company Noble Group has established a forfaiting operation in London to trade in short and long term trade assets. The new venture for the Singapore-listed, Hong Kong-based company comes less than a year after it first dipped its toes in trade finance by offering clients structured commodity finance, lending and factoring.
David Sullivan who heads up Noble's finance activities says once the group has cornered a piece of the European forfaiting market it will move into other trade finance services on the continent.
The new division will be run by Mark West and Ralph Napolitano, two executives hired from London Forfaiting Company. London Forfaiting, considered the lender of last resort for the trade bill market, is known to be rationalizing following two tough years in which business has been slow and margins narrow.
"The decision to move into forfaiting in Europe has been driven largely by our ability to persuade these two men to join our team," says Hong Kong-based Sullivan. "We will start by targeting UK and European exporters buying short and long-term paper. There is a lot of paper floating around in Europe at the moment. The short term paper is bank paper linked to an acceptance or obligation under a letter of credit. The long term paper is linked to capital goods in the form of promissory notes."
Asked whether Noble would eventually offer forfaiting services in Asia, Sullivan says this depends on the maturity of the market. "Unlike Europe, Asia is not a big market for the manufacturing of capital goods. It is a short-term market ruled by the letter of credit. For this reason forfaiting hasn't taken off in the region."
To date, Noble's trade finance activities have centred around factoring and some simple trade finance lending to small and medium commodity companies that find it difficult to get credit from the banks. Sullivan says the group moved into trade finance between six and eight months ago using the expertise of its treasury people, many of them ex-MeesPierson. More recently, the group has been mandated to arrange structured finance for a Chinese producer that wants to buy equipment.
