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New Issue: Trafigura Securitisation Finance PLC (Series 2021-1)

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New Issue: Trafigura Securitisation Finance PLC (Series 2021-1) New Issue: Trafigura Securitisation Finance PLC (Series 2021-1) Primary Credit Analyst: Florent Stiel, Paris + 33 14 420 6690; [email protected] Secondary Contact: Isabel Plaza, Madrid + 34 91 788 7203; [email protected] Table Of Contents Transaction Summary Key Changes From The Issuance Of Series 2018-1 Rating Rationale Environmental, Social, And Governance (ESG) Strengths, Concerns, And Mitigating Factors Transaction Structure Credit Enhancement Collateral Description Surveillance Details Related Criteria Related Research WWW.STANDARDANDPOORS.COM JULY 22, 2021 1 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global 2692564 Ratings' permission. See Terms of Use/Disclaimer on the last page. New Issue: Trafigura Securitisation Finance PLC (Series 2021-1) Ratings Detail Ratings Minimum credit enhancement Class Rating* Amount (mil. $) (%) Interest § Legal final maturity A1 AAA (sf) 139.5 Dynamic, with a 15% floor One-month LIBOR plus 53 January 2025 bps A2 AAA (sf) 139.5 Dynamic, with a 15% floor Fixed rate January 2025 B BBB (sf) 21.0 Dynamic, with a 9% floor Fixed rate January 2025 *Our ratings address timely interest and ultimate principal payments. §The interest rates will be determined on the pricing date. The total floating-rate coupon on the class A1 notes will be subject to a minimum level of zero percent. Bps--Basis points. Transaction Participants Originators Trafigura Pte. Ltd., Trafigura Asia Trading PTE Ltd., and Trafigura Trading LLC Seller Trafigura Pte. Ltd. Master servicer Trafigura Group Pte. Ltd. Standby servicer Société Générale Matching agent Société Générale Security trustee SG Kleinwort Hambros Trust Co. (CI) Ltd. Collection account provider Standard Chartered Bank Transaction account provider Standard Chartered Bank Paying agent Citibank N.A. London Branch Arrangers Société Générale, Citigroup Global Markets Inc., and SMBC Nikko Securities Inc. Book runners Citigroup Global Markets Inc., SMBC Nikko Securities Inc., and SG Americas Securities LLC. Supporting Rating Institution/role Rating Standard Chartered Bank as transaction account bank and collection account bank A/Stable/A-1 Transaction Key Features Closing date July 22, 2021 Collateral Trade receivables Description Trade receivables arising from contracts for sale of crude oil, oil products, non-ferrous metals, non-ferrous metal concentrates, iron ore, coal, and refined metals Country of origin Multiple Obligor concentration Maximum concentration limits are defined within the program Total receivables (mil. $) 4,483.45* *As of May 28, 2021. WWW.STANDARDANDPOORS.COM JULY 22, 2021 2 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the 2692564 last page. New Issue: Trafigura Securitisation Finance PLC (Series 2021-1) Transaction Summary S&P Global Ratings has assigned its credit ratings to Trafigura Securitisation Finance PLC's (TSF) trade receivables-backed series 2021-1 medium-term notes (MTN). At closing, TSF issued class A1 and A2 MTNs (together, the series 2021-1 class A MTN) and class B MTNs. This is TSF's sixth MTN issuance that we have rated. For series 2021-1, both floating-rate class A1 notes and fixed-rate class A2 and B notes were issued. The series 2021-1 transaction is scheduled to revolve for three years, and like the other notes issued by TSF, uses dynamic credit enhancement (default, yield, and dilution reserves) that is calculated in line with our trade receivables criteria (see "Related Criteria"). This means that credit enhancement levels adjust dynamically to reflect the portfolio's credit quality over time. The securitization program operates akin to a master trust structure, whereby a common pool of trade receivables backs multiple note issuances. Credit enhancement for the senior notes (including the series 2021-1 class A MTNs) is in the form of subordination of the junior notes (including the series 2021-1 class B MTNs) and the senior and junior subordinated loans. The program is also subject to maximum country and obligor concentration limits, and the credit enhancement floors for each rating level are in line with our trade receivables criteria and our sovereign risk criteria (see "Related Criteria"). The senior and junior notes benefit from a floor of 15% and 9% credit enhancement, respectively. Key Changes From The Issuance Of Series 2018-1 There were no material changes since the issuance of Series 2018-1. The only changes are (i) the change in the bank account provider (ii) the change in the benchmark rate replacement, and (iii) the addition of Trafigura Asia Trading PTE Ltd. (TAT) as new intermediary originator (taking on part of Trafigura Pte. Ltd.'s [PTE] activity). Rating Rationale The ratings reflect our assessment of the following factors. Economic conditions The current portfolio is largely comprised of receivables from obligors domiciled in Asia-Pacific and Europe. However, the pool has a very high turnover rate and the composition could significantly change over time, subject to compliance with the portfolio concentration limits. Given the dynamic reserves in the transaction, which would account for any deterioration in receivables performance, we do not give specific consideration to the current macroeconomic outlook. Operational risk The originators (PTE, TAT, and Trafigura Trading LLC [TTL]) and master servicer Trafigura Group Pte. Ltd. (TGPL) are, in our view, experienced participants in executing this securitization program, which has been in place since 2004. WWW.STANDARDANDPOORS.COM JULY 22, 2021 3 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the 2692564 last page. New Issue: Trafigura Securitisation Finance PLC (Series 2021-1) Our operational risk criteria focus on key transaction parties (KTPs) and the potential effect of a disruption in the KTP's services on the issuer's cash flows, as well as the ease with which the KTP could be replaced if needed (see "Related Criteria"). Furthermore, when analyzing operational risk for trade receivable transactions, we consider the creditworthiness and franchise value of the seller-servicer, among other things, when assessing the likelihood of a material disruption in its services. Based on our assessment of the creditworthiness of Trafigura, our view of the servicer's capabilities and the characteristics of the underlying receivables, and the presence of a hot back-up servicer, Société Générale, which would step-in following a disruption of the initial servicer, we have concluded that our operational risk criteria do not constrain our ratings in this transaction. Credit risk The underlying obligors of the receivables tend to be highly rated companies with short payment terms. This, in our opinion, results in low credit risk on the portfolio, and to date defaults, delinquencies, and dilutions have all been negligible. The transaction uses dynamic credit enhancement that is in line with our trade receivables criteria, and provides credit enhancement commensurate with the assigned rating levels. This means that credit enhancement levels will adjust dynamically to reflect the credit quality of the portfolio over time. The dynamic enhancement is provided by a senior subordinated loan and a junior subordinated loan (the latter granted by the seller), with the senior and junior notes benefitting from a floor of 15% and 9% credit enhancement, respectively. The transaction contains stop-revolving triggers for defaults, dilutions, delinquencies, and collection periods. The actual portfolio performance has been well within the respective trigger levels. Payment structure and cash flow mechanics There is no principal deficiency ledger due to the transaction's dynamic nature. Collections are applied daily to purchase new receivables, performance-based reserving is calculated dynamically, and there are stop-revolving triggers that are also tested weekly. The transaction uses a combined interest and principal payment priority, under which repayment of the notes is fully sequential. In our view, the sizing of the yield reserve in the transaction should cover all senior waterfall items and coupons on the notes during the amortization period. Our analysis indicates that the credit enhancement available to the notes is commensurate with the ratings assigned to the class A1, A2, B notes. Legal risk The issuer is a limited liability company incorporated in the Republic of Ireland, and its share capital is held on trust. We consider it to be a bankruptcy remote special-purpose entity in line with our legal criteria. We have received and reviewed updated legal opinions. Setoff risk is mitigated by the program's eligibility criteria not permitting receivables subject to setoff to form part of the securitized portfolio. WWW.STANDARDANDPOORS.COM JULY 22, 2021 4 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the 2692564 last page. New Issue: Trafigura Securitisation Finance PLC (Series 2021-1) Counterparty risk The collection bank account provider and the transaction bank account provider is Standard Chartered Bank (A/Stable/A-1). In our view, the transaction's replacement mechanisms adequately mitigate its exposure to counterparty risk at the 'AAA' rating level (see "Related Criteria"). Commingling risk is mitigated through a dedicated collection account
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