ITFC Entices the Private Sector in Sudan

ITFC has successfully tailor-made Shariah-compliant solutions in order to meet the specific needs of the client and to effectively compete in an aggressive market environment. In this way, ITFC managed to harness a diversified portfolio with sugar as one of the major commodities. Taking business a step further, ITFC lent its support to the private sector in Sudan, by financing a significant sugar deal, which helped in advancing the private sector role through a sustained commitment to improve access to value-added and competitive financing.

 

ITFC was able to design the first Co-Financed Operation provided by the IDB Group to the private sector in Sudan. Under this Co-financing, the ITFC as an arranger and a financier, and OPEC Fund for International Development (OFID) as a financier extended a Murabaha Financing with the amount of US$50 million in favor of Kenana Sugar Company (KSC) in order to import Raw & White Sugar from different sources worldwide.

 

In this deal structure, ITFC & OFID each contributed with the amount of US$25 million for the purpose of using such contribution in the Murabaha Financing with KSC for purchasing Raw and White Sugar. The financing was granted to KSC on clean basis as the participants took the direct risk of KSC. However, a Debt Service Reserve Account (DSRA) held by a third party was setup; the DSRA was designed in order to mitigate the Forex risk since the facility is denominated in US Dollars while the repayment is in EURO.

 

By extending such financing to Sudan, ITFC supported the sugar manufacturing industry in order to get Sudan recognized once again as the biggest and the only sugar exporter in the region. ITFC has not only creatively designed this operation; it has supported, along with the other co-financers, the biggest Agro-Industrial Company in the country, and by this, the          Co-financiers supported the Agricultural Sector (representing 27% of Sudan’s GDP) as well as the Industrial Sector (representing 36% of Sudan’s GDP). ITFC believes that this financing operation is a step forward on the way of its strategies to support and develop the economy of Sudan.

 

Deal Mechanics

 

 

  1.  KSC concludes import transactions with its suppliers on behalf of ITFC as ITFC will buy the Sugar from the supplier on spot and then sell it to KSC on differed basis. Kenana, through a local bank, issues a Non-operative Letter of Credit in favor of the Supplier, a copy of this LC is sent to ITFC through authenticated means.
  1. ITFC issues an Irrevocable Commitment to Reimburse (ICR) in favor of the Supplier, copies of this ICR are sent to the ITFC Paying Agent and the Issuing Bank.
  1. The Advising bank advises the LC & the ICR to the Supplier.
  1. The Supplier shipped the Sugar to the port of destination in Sudan and submitted the required shipping documents to the Negotiating Bank. 
  1. When the documents are found in compliance with the LC terms and conditions, the Negotiating Bank will certify to the ITFC Paying Agent that the documents are found in compliance through authenticated means, and send the documents to the Issuing Bank.
  1. The ITFC Paying Agent, as instructed in the ICR, will transfer the value of the documents to the Negotiation Bank. The resale price will be computed and a debit advice will be given to Kenana.
  1. KSC takes the delivery of the imported Sugar  and on maturity date, Kenana will repay ITFC the resale price.  

 

 

Term Sheet

Instrument

Murabaha  Co-Financing  

Obligor

Kenana Sugar Company

Principal Activities

Sugar Refining

Date of issue

Aug. 25th, 2010

Issue size

US$50 million

Tenor / Maturity

Twelve months financing tenor

Coupon

N/A

Repayment schedule

Bullet Payments

Lead Arranger

ITFC

Lead Manager

ITFC

Co-Arrangers/Managers

OPEC Fund For International Development (OFID) as participant

Legal Counsel

ITFC Legal

Financial Advisor

nil

Guarantor

nil

Trustee

nil

Shariah Advisor

In house

Method of issue

Letters of Credit

Utilization of Proceeds

To buy raw and white sugar

Ratings

nil

 

 

 

 

Contact Us

  • P.O. Box 55335, Jeddah 21534
  • Kingdom of Saudi Arabia
  • Tel: +966 12 646 8364
  • Fax: +966 12 637 1064