Dubai Multi Commodities Centre (DMCC) announced today that the Global Multi Commodity Receipt (GMR)-facilitated financing by Standard Chartered Bank to Mohsen Line Trading has been awarded the ‘Deal of the Year 2008’ by Euromoney’s Trade Finance magazine.

Backed by the GMR, a DMCC-operated electronic warehouse receipt system, the $10 million financing transaction by Standard Chartered Bank enabled Mohsen Line Trading to meet its working capital requirements for purchasing large quantities of rice and storing it in the Steinweg Sharaf warehouse in Jebel Ali Free Zone for future use.

“In view of the prevailing tight credit conditions where banks have a limited appetite for risk, the GMR proves to be a valuable risk mitigating tool. DMCC is pleased to receive this recognition from Euromoney’s Trade Finance magazine for the second time in a row, highlighting the significance of this financing option,” said Dr David Rutledge, chief executive officer of DMCC.

“The award also underlines the importance of GMR as a crucial product to assist in seasonal procurement and build up of food grain stocks supported by bank financing,” he added. “The timing of the award is significant as various options are being explored in the region to create a stockpile of essential food grains to meet the growing demand.”

A D Ganesh, managing director, Standard Chartered Bank, said: “For a leading commodity trade finance bank in the region like us, the GMR helps us structure and manage risk better by taking the intrinsic value of the commodity as collateral instead of just relying on the borrower’s balance sheet.

“The GMR enables us to create an online, quick and transparent security interest over the goods financed.”

He added: “The successful completion of the rice financing deal for Mohsen Line Trading has also opened up new avenues for commodity trade financing in the region. In particular, we see a tremendous opportunity in financing the seasonal inventory build up of agricultural commodities.”

Under the terms of the GMR, members who store their physical commodity assets in a DMCC-approved warehouse, or who assign control over their goods to an approved Collateral Manager, can be issued a GMR against the value of that commodity. The member can then use the GMR to obtain financing from member banks.

Ashok Das, executive director - vommodities, DMCC, said: “The GMR structure enabled Mohsen Line to avail financing of its stocks of rice by using it as the primary collateral. In the current environment, traders may look at pledging their inventory to banks using the GMR system to raise liquidity. Banks are likely to consider such structures acceptable compared to clean lending.

“For traders already enjoying clean lines from banks and seeking an increase, the GMR-backed structure allows the possibility of overcoming the bank’s appetite for clean lending. As we work with a range of commodity traders and financiers, DMCC hopes to replicate the success of the GMR-based financing across the full spectrum of commodities,” he added. – TradeArabia News Service