DGR used to fund INTL
Dubai, August 16, 2007
Dubai Gold Receipt (DGR), an electronic warehouse receipt system operated by the Dubai Multi Commodities Centre (DMCC), has facilitated Fortis to extend $17.8 million in financing to INTL Commodities.
INTL Commodities is a DMCC member company and part of a group that has offices around the world, including Dubai, New York, London, Florida and Singapore.
The financing, which forms part of the recent Fortis-led $140 million syndicated loan to INTL Commodities Inc, was structured out of Fortis’ New York office and will be used for the expansion of INTL’s global commodities business. This is the first time that international organisations have used the Dubai-based DGR model to facilitate collateralised financing in Dubai.
This ongoing financing agreement for INTL Commodities has been achieved in phases, and includes 10 transactions spanning the last three months. The DGRs were issued against a total of 799kgs of gold and 1,500kgs of silver, providing INTL Commodities with access to US$17.8 million in financing. Brink’s Global Services, the international security services company, is serving as the vault operator for this transaction.
The Dubai Gold Receipt, an innovative tool for accessing gold and silver financing, is an electronic vault receipt system that provides members with real-time access to various forms of gold stored in DMCC-approved vaults.
Under the terms of the DGR, members who store precious metal commodity assets in a DMCC-approved warehouse – or who assign control over their goods to an approved Collateral Manager – can be issued a DGR against the value of the precious metal. The member can then use the warehouse receipt to obtain financing from member banks.
“Commodity warehouse receipts are increasingly being recognised as an innovative trade financing tool, and the UAE is currently just one of 26 countries worldwide that offers this innovative collateral-based financing model. This landmark international transaction, in particular, is evidence of the growing confidence the international banking sector has placed in DMCC and the DGR model, and we are confident that this will be the first of many such transactions,” said DMCC Executive chairman Ahmed bin Sulayem.
“Fortis has a rich history of financing physical commodities that can be traced back to 1720. Today we finance a wide range of physical commodities from around the globe. In each jurisdiction, we tailor solutions to location specific requirements. Fortis was established in Dubai less than a year ago and the DMCC initiative was one of the key considerations that attracted us to Dubai. We are proud to be the first international bank to have used the DGR as security to finance local gold together with one of our clients, INTL Commodities Inc. The transaction has been driven out of our New York office and due to our local presence we have been able to gear our facilities to the DGR system and establish a solid security over the physical metal,” said Fortis Bank Middle East general manager Silvan Doorenspleet.
“DGR has proved to be an invaluable risk-management tool for institutions like Fortis as we seek to extend credit to growing organisations such as INTL Commodities. Thanks to the security provided by DMCC and the DGR, we can extend credit with full confidence to our clients here in Dubai and across the globe,” he added.
DGR transactions are conducted on an electronic, web-based system that ensures real-time efficiency and security. This system also allows the transfer of title of the DGR to other traders, providing members the opportunity to trade their goods with great confidence among a network of approved members.
“These transactions, which take place in Dubai but have benefits that are realised in New York, London and Asia, clearly highlight Dubai’s role as a global hub for physical gold and demonstrate the advantages of DMCC membership in general, and DGR financing in