Energy Trade Finance ($200MM) and Expansion Financing for Energy Company

23-Mar-2023

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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The Firm The energy company is a publicly traded wholesale bulk distributor, inventory manager, logistics coordinator of refined fuel products. On the wholesale side of the business the firm buys and ships fuel and natural gas on two domestic U.S. pipelines, and then distributes the fuel along the pipeline (last 10-20 miles) before reaching final destination (within 20-28 days). On the retail side of the business the firm buys and sells refined fuel products such as gasoline, diesel, natural gas, and jet fuel to C-stores (within 10 days) and hedges with accounts receivable insurance.

On the wholesale side, the customer is generally other distributors and on the retail side the customers are usually C-Stores. In both cases, the company has accounts receivable insurance through a subsidiary of an AA rated global insurance company.

The firm generates around $400MM in annual revenue and has a pending acquisition which will lead to a projected $750MM-$1B in annual revenues for 2023. It estimates $3B-$5B in revenues within the next 2-3 years.

The Credit Opportunity The energy company is looking for lending relationships to finance the purchase of fuel products (which is hedged) on both the wholesale (21-28 days) and retail (10 days) businesses. 

On the wholesale business the firm is looking for $75MM-$100MM in term debt that will be used for hedging and presold refined fuel products. On the retail side of the business the energy firm is looking for $75MM-$100MM to use for buying fuel and delivering to end users on 10-day terms insured with AA credit.  With short terms on accounts receivables, the firm typically are turning very quickly and that leads to high revenue on a $100MM loan.

The vast majority of the revenue is insured for payment with AA accounts receivable credit insurance and on the pipeline; the fuel is hedged at purchase. The firm never buys fuel unhedged because it is a distributor not a trader.

The firm is also looking for expansion credit capital in order to bring on board a cohort of sales staff that are collectively responsible for $700MM gallons of fuel distribution annually that the company would need to provide capital for. Due to the capital constrained nature of the energy distribution business the firm is looking for larger credit relationships because the firm desires to further grow its business by buying larger quantities of physical fuel products, hedging with a security, and selling to end-users. 

The firm purchases and distributes fuel products from the top refiners and midstream marketers:

Oxstones Real Estate, www.Oxstones.com CRE@Oxstones.com

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