To provide credit protection for an underlying and revolving portfolio of US$3.5bn in trade finance assets, Deutsche Bank has originated, structured, arranged and placed a first loss tranche of US$227.5m with a syndicate of institutional investors from Europe and the Americas. The issuance follows the maturity of TRAFIN 2018-1 – the bank’s fourth iteration of this trade finance securitisation – in November 2023.

The synthetic securitisation transaction has a 3.5-year scheduled maturity, and the weighted average life of the initial pool is around 90 days. As these short-term assets mature and the pool amortises, new trade finance assets will be selected to replenish the portfolio on a monthly basis based on pre-set conditions.

“We have been at the forefront of opening trade finance assets to capital markets and remain one of a small number of issuers in the synthetic securitisation space,” said Oliver Resovac, Global Co-Head of Trade Finance & Lending at Deutsche Bank. “The continuation of this landmark securitisation programme – now in its fifth iteration – allows our trade finance business to originate a greater volume of transactions in the space, which, in turn, is helping us to power the real economy and develop local communities.”

In addition, TRAFIN 2023-1 represents one of only a few synthetic securitisations issued by Deutsche Bank that has been verified as compliant under the European Union’s “Simple, Transparent & Standardised” standard – enabling higher overall capital relief and tighter pricing.

The transaction comes as trade finance as an asset class continues to gain traction among institutional investors. By investing in securitised tranches referencing traditional short-term trade finance products – including letters of credit and accounts receivables – investors can gain exposure to a global portfolio diversified across products, industries and client types.

The asset class is also generally characterised by low default rates, self-liquidation, and short tenors –making it a stable, attractive and relatively scarce asset class for capital market investors.

“On the back of strong investor demand, we are also expanding into other forms of capital market investment products for trade finance, including funded risk-sharing arrangements, traditional working capital, and documentary trade facilities, among others,” added Deutsche Bank’s Resovac. “Going forward, we believe these products will play an an increasingly important role in providing additional sources of capital.”