Business comparison SYME and TF22 Mar 2021 13:14
TF and SYME : Funding /costing comparison.
It’s difficult to make a direct comparison, because we’re not comparing like with like and we lack detail of typical transaction structure.
SYME has focussed on potential returns to shareholders (via costs to customers) but said little about return to funders.
TF has provided a term sheet showing target return to funders but - as an unlisted company – has said nothing about return to its owners.
CEMP – USD Trade Flow Fund SP | TradeFlow
The termsheet allows us to make a partial comparison of both reward and risk.
Security :
TF : Pre-booked commodity-backed trade finance, max tenor 90 days
SYME : Inventory-backed, customer-driven, max. tenor variable
Credit risk :
TF : Minimal, as principal. It may take a security margin, I can’t find the reference off-hand
SYME : Credit-scoring (possibly credit rating agency) dependent. Takes a security margin
Security enforcement :
TF : As owner of ‘merchantable’ goods in transit, almost immediate, with minimal capital loss
SYME : Dependent on legal process, access, co-operation and re-seller effectiveness, recovery variable.
Risk concentration :
TF : Avge transaction size low $500m/700 = $0.700K, but historic commodity concentration high (2/25 commodities – coal and rice - = 61%)
SYME : Planned avge customer exposure proposed is $ 15m, at 29Jan ..” key portfolio sectors are currently Materials, Capital Goods, Retailing and Food, Beverage & Tobacco ( as originations)”
Liquidity :
TF redemption terms : at each quarter end, min 30 days notice ie 30 to 90 days.
SYME redemption terms : 3 year lock-in.
Reward :
TF : Target return (net) of 5%+ over 3 month $ LiBOR (0.2%) = 5.2%. ‘Net’ after m’gment fee 1.5% p.a.
There’s a hedge-fund like perf.fee of 15% of capital growth, not clear where this might come from ?
SYME : AIUI indicative 6% over 3 year money (range last 12 mos 0.16-0.31%).
Cost to borrower /customer respectively :
TF : 5.2% (funds) + 1.5% (mgment) + whatever the market will bear. If TF is truly an ‘enabler’ with little direct competition its intermediary role is presumably worth a lot. Total : ???
SYME : DD fees (amount, anybody ?) + on boarding + 1-1.5% management + 6.25% + approx.. Total : Around 8%.
Business management :
TF : Short cycle and transaction visibility means it can forecast cashflow well and optimize use of funds available, growing or shrinking balance sheet quickly as circumstances deem appropriate.
SYME : Has committed funds for 3 years, but utilisation at customer’s discretion. Needs a big bank ‘swing supplier’ to cover slack and /or some rebate mechanism for customers.
E and OE
It’ll be interesting to see how these 2 very different approaches get along.
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