2022 Full-year results
Financing to meet diverse business needs
Financing to meet diverse business needs funding model
Our funding strategy matches sources of funding to financing requirements. We have developed diverse financing strategies that maximise scalability, flexibility and business resilience.
Continued access to capital
Trafigura’s activities require substantial amounts of capital.
We source, store, blend and deliver commodities around the globe.
We invest in terminals, logistics and physical infrastructure to improve the efficiency of our trading operations.
Our diversified funding model allows us to continue to operate effectively and successfully in all market conditions. Its scalability and structure protects the business from market shocks and provides flexibility and the ability to capitalise on opportunities as they arise.
We have put in place a global programme of flexible, short-term facilities to finance our day-to-day operations and a programme of longer-term, corporate facilities to finance our asset acquisition and other corporate requirements.
Available funding exceeds our everyday requirements. This provides headroom for unusual market conditions. We also maintain substantial cash balances to ensure that we will always meet day-to-day capital commitments, even in unexpected circumstances.
Our approach to funding
Diversification improves competitiveness and access to capital
We diversify both the sources and the structure of our financing to minimise risk and maximise operational effectiveness.
We raise funds in a variety of markets in the US, Europe and Asia-Pacific. We have lending arrangements in place with around 140 banks around the world. We are therefore not constrained by credit restrictions for specific financial institutions, sectors or regions.
We raise capital with a range of repayment schedules, from very short-term facilities to maturities greater than 10 years. This spreads our exposure across the yield curve.
We ensure that all funding arrangements are in compliance with applicable sanctions.
Match-funded, collateralised lending reduces credit risk
As a matter of policy, we match the type of financing to the business requirement. We have established a three-pillar funding structure to put this into practice.
We use short-term financing for trading. These loans are secured against the underlying physical commodities. Lines are frequently marked-to-market so the level of financing tracks the value of the underlying collateral as prices change. We raise longer-term debt to finance fixed assets and investments.
Transparency promotes stability
As a private company relying on debt to finance its operations, Trafigura’s performance is closely scrutinised by a large group of banks and investors worldwide. We comply with the financial covenants attached to our syndicated bank facilities. Members of the finance team regularly meet with our lenders' representatives. These meetings often include operationally focused personnel (from Credit, Compliance and our commercial teams) who provide additional insight into our business model. As an issuer of publicly listed debt, we also meet the transparency requirements of our bond investors. Our interim and full-year reports are published online. We hold regular calls and presentations to update investors and to respond to specific queries directly.
Public credit ratings
Trafigura does not hold a public rating and does not seek to obtain one. The Group focuses on strengthening its balance sheet through long-term value creation.
We obtain our funding from stakeholders who understand our business model in detail and whose investment decisions are not driven by external ratings. We have significantly expanded our sources of financing over the years by maintaining a sustainable credit standing that is consistent with an investment-grade profile.
Likewise, the absence of a rating means that Trafigura’s business and investment decisions are not taken on the basis of maintaining a particular rating level, something which becomes particularly important at times of high market volatility.