Bonds backed by loans made by BNP Paribas SA to commodity traders will be repaid early because there’s a shortage of borrowers seeking to finance new shipments amid conflict in the Ukraine, according to Fitch Ratings.
The $131.6 million Lighthouse Trade Finance Issuer I Ltd. notes will be redeemed because of “the shortage of commodity transactions” originated by BNP Paribas’s Geneva office, which focuses on energy commodities sourced from eastern Europe, including Russia, Fitch said in a statement.
“The recent geo-political development in the area had a significant weight on the decision,” the ratings firm said.
The U.S. and the European have hardened restrictions on trade with Russia amid escalating violence in Europe’s eastern fringe. The ruble is the worst performing among 31 major currencies tracked by Bloomberg this month, while offshore bonds from Russian companies lost the most among investment-grade securities worldwide.
BNP Paribas’s Lighthouse transaction was the first deal of its kind and allowed France’s largest bank to offload credit risk associated with commodity trade finance loans.
The securitized assets backing the deal are short-dated and typically mature within 15 to 90 days, and the portfolio was updated throughout the life of the transaction. The loans cover a funding gap between the commodity companies’ payments to suppliers and the receipt of payments from buyers.
The bonds will be redeemed on Aug. 18 and investors will receive their principal as well as a prepayment break fee, Fitch said.