ADCB launches back to back letter of credit facility

Back to back letter of credit facility is a specialist trade finance product offered to companies who buy and sell goods and companies in the re-export business. It also benefits trade in commodities such as oil and gas, or agricultural products from producers to the refiners marketers in markets worldwide.

The back to back letter of credit facility is a complex form of financing, which not too many banks currently offer in the UAE market because it requires banks to have a complete understanding of international trade and the risks associated therein including geo-political issues. Dealing with multi-country trade requires an elevated level of expertise to optimally deliver these financing solutions, which ADCB is able to offer its clients.

Colin Fraser, Head of Wholesale Banking Group, ADCB, stated that “due to foresighted development and it s strategic geographic location, the UAE has rapidly developed in to a major regional and global trade hub. This has successfully positioned the country in to a world class player complemented through the development of free trade zones which are closely aligned with the major ports and airports across the UAE.

At ADCB, our focus is to provide best of trade solutions to support our valued customers. It is with this at the forefront of our thinking that we have launched our structured back to back trade finance capability today, which will help many of our clients to leverage new and existing opportunities for trade business.

ADCB has a fully developed trade finance division, encompassing various specialist products that this division provides of which the most relevant new product is the “back-to back letter of credit facility.’

The back to back LC facility is the financing of an import trade on the strength and security of the backing export trade. It allows the trader the financing capabilities to buy goods or commodities on the strength of the finance available by the sale proceeds of those goods to a third party.

In times of global liquidity constraints, the back to back product provides businesses the required liquidity they need in order to sustain their international trading business, i.e. ADCB can provide the back to back facilities for qualifying companies with minimal cash margin requirement.