Construction of an LNG Tank Farm, Currency Hedge Provider

Sep 01, 2017

This was no straightforward deal as the payment structure for this project exposed Bidtank to Foreign Exchange risk due to payments being made to an offshore company over a period of three years. In addition, Bidtank had a requirement to hedge their exposure to the USD and this had to be incorporated into the overall hedging strategy.

Standard Bank provided Bidtank with various hedging alternatives including option based structures which allowed flexibility for a deal amount of USD36 million. This flexibility was critical, in the eventuality of pay away dates being changed.  The use of vanilla calls, with rights, but not the obligation, to buy, was the type of hedging flexibility Bidtank required so that they could take advantage of any upside when it presented itself. Another key feature is the opportunity of restructuring the hedging deal should ZAR strength return resulting in the best possible client-focused solution given today’s inputs with unknown future market changes built-in. In the end, the Bidtank deal was closed once all the regulatory requirements were met.

The Bidvest Group Limited is a services, trading and distribution company. The Group owns and has significant holdings in over 300 companies. Bidvest operates through seven divisions: Services, Freight, Automotive, Office and Print, Commercial Products, Financial Services and Electrical.

With currency volatility in uncertain times, Standard Bank is the right global markets partner with the right financial advice for clients looking to secure strategic projects with the right financial packaging.

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