In today’s dynamic business environment, Know Your Customer (KYC) processes are more critical than ever. However, these are often complex and time consuming particularly during client onboarding. At Deutsche Bank, we are optimising our KYC services to address these challenges; delivering a seamless and personalised experience for our corporate clients.

Our newly launched digital solution called dbWelcome streamlines the KYC review process. It does this by enhancing risk management and ensures adherence to regulatory standards across all jurisdictions Deutsche Bank operates in. Designed with your needs in mind, dbWelcome via Deutsche Bank’s online platform combines efficiency with precision, enabling you to focus on your core business priorities.

Step 1: Your relationship management team will contact you directly ahead of your KYC Review to discuss your participation in dbWelcome. As part of this, they will confirm details of the KYC contact person who will be provided with access to dbWelcome to complete KYC requests.

Step 2: Once access is granted to the KYC contact person, they will follow steps to activate their dbWelcome account. These instructions can be found here.

Step 3: Wait for response – digital KYC requests will be sent to the nominated KYC contact person on dbWelcome according to the KYC schedule & they will receive an email notification to confirm when this is ready to be completed.

Please contact our Electronic Banking support team for technical issues relating to activation of your dbWelcome account:

The increasing importance of security, shifts in technology trends and ongoing efficiency drives have meant that clients are looking for products and services which support the optimisation and streamlining of their treasury processes. 

Our integration and messaging products are flexible, and designed to support and enable the standardisation, automation and centralisation of clients´ Treasury workflows.

We support several bank communication options in accordance with varying client needs. And to process global transaction banking services via the bank communication we offer a wide range of standardised industry formats, for example ISO 20022 XML messages. 

Through our ‘partner client integration’ solutions, global transaction business can be seamlessly integrated, from client IT-environments to our systems, reducing operational risks, increasing automation and streamlining processes.

Additionally, we provide a variety of messaging products, including ‘Message Based Electronic Bank Account Management` which can further complement and facilitate treasury business.

Client centricity is a core value for us. We continually engage with our clients, as well as the Enterprise Resource Planning (ERP)  and Treasury Management (TM) system providers to understand the market and ensure that our solutions are compatible with their needs.

Digital certificates form the basis of secure e-mail communication. These digital documents identify senders and recipients as the bonafide holders of their e-mail addresses. Certificates are only issued following verification of identity. Both parties communicating must be in possession of such a certificate and the issuing organisations must have confidence in one another. If these criteria are satisfied, an e-mail can be sent in an encrypted form (see diagram). The code required to decrypt an e-mail is available only to the clearly specified recipient.

A long-standing client of Deutsche Bank, Metinvest had been an enthusiast of the PXF structure for some years as it built capacity and grew revenues, a high point being the US$14.189bn in revenues it posted in the 2011 accounts, up 51.6% on the previous year and driven mainly by record sales of steel and iron ore products. It had also vertically integrated its operations into two separate divisions of steel and mining because, as it said at the time, the company’s assets were consuming all the raw materials it produced.

Metinvest had enjoyed a strong PXF performance track record, from well before its incorporation within the System Capital Management Group in 2006², navigating through the ‘Orange Revolution’ and then the Global Financial Crisis without so much as even a covenant waiver, which was remarkable in 2008-09 when steel and iron ore prices collapsed by anything up to 80%. They also achieved scale, with Ukraine’s largest commercial syndicated loan of US$1.5bn, also on a PXF basis, in 2007. This was a record borrowing in the company’s history, the largest loan attracted by a private company in Ukraine during 2007, and its repayment confirmed to the international financial community the company’s “conservative financing approach and flexible business model”³.

On 9 April 2015, the company issued a press release announcing that it was in default and was beginning talks with the holders of its 2015, 2017 and 2018 bonds about a postponement of the repayment of principal on bonds maturing on 20 May 2015. It also sought consent that bondholders would waive their right to make claims in connection with certain cases of default that had occurred or would occur in the future.

The nature of PXF lenders is that repayment is credit-enhanced by the underlying commodity exports they finance, but, should commodity prices fall dramatically, or production and exports suddenly be hit, there may not be enough exports by value to repay, and then they face delay. “When prices go back up again, and production recovers, then repayment should catch up again as well, off the back of the improved flows. It’s why you should always see a ‘cash sweep’ in successful PXF restructurings,” explains MacNamara.

This isn’t necessarily how bondholders may see it, of course. The PXF lender is uniquely incentivised to keep the company alive. This means all lenders working together with the objective of everyone getting repaid – eventually – and trying to avoid a situation where some lenders try to force liquidation. In liquidation, everyone is unsecured, so the restructuring is based on this and the restructurer having control of payment flows and all the security. From the bondholder perspective, though, while the company is alive, they are unsecured creditors, but the PXF lenders control the export revenues and get them first (and here there were no domestic revenues to be had, due to the country collapse). But if the bondholders push the company to liquidation, then the PXF lenders no longer have their ‘future’ security, and all creditors are in the same boat.

Metinvest’s great achievement was to convince sufficient bondholders that the boat would be a substantially bigger one if they let the company run on. The challenge then for the restructurers is that the bondholders have taken a higher price because they have accepted a higher level of risk, with unsecured bullet repayment at final maturity; conversely, PXF lenders have accepted a significantly lower price to take a lower order of risk, which is amortised (after a grace period of two years) and backed by the export flows, and reconciling these two conflicting approaches to emerging market debt requires a foot in both conceptual camps.

Fast-forward to 24 April 2018. The political situation stabilised in Eastern Ukraine and Metinvest reorganised itself so that it could manage without supplies and materials from trapped assets in the occupied territory of Donbass, in effect freezing the conflict. In addition, commodity prices had rebounded. In this environment, the 22 March 2017 deal, while good at the time, was now restrictive, particularly the shared security between the PXF lenders and the bondholders. To tap the bond market further, Metinvest needed to unbundle the restructured facilities, which had to be done in one transaction. This meant removing the shared security, along with the additional limitations on dividend payments and acquisitions that were agreed during the restructuring, so that they could re-enter the bond market, refinance the bonds and use some of the proceeds to pay down the PXF (reduced to US$624m on 8 May 2018)⁶ – which had been in restructuring rather than repayment mode.

“We agreed everything with the PXF with certain conditions on repayment, and some price increasing. Although the total tenor of the facilities was extended to 4.5 years, the average life of the facility decreased because the PXF had a large repayment at the end – but they accelerated the repayments profile,” explains Sander Stuijt, Head of Structured Commodity Trade Finance EMEA at Deutsche Bank. Deutsche Bank and ING served as global coordinators and, together with Natixis and UniCredit, acted as joint bookrunners of the bond refinancing and coordinating mandated lead arrangers of the PXF deal.

The deal had a lot of moving parts and participants, but track record is all. Boris Jaquet, Deutsche Bank’s Head of Distribution EMEA, reflects, “It had been a major exercise to manage 26 existing lenders to agree to the amendment and extension, while attracting new investors into the amended PXF and managing conversion of some lenders to new bond issuance. This achievement is testament to the strong reputation of the borrower and the robust credit structure.”

When the new US$765m PXF was all signed, Metinvest approached the bond market and issued US$1.592bn in new bonds that had the necessary liquidity, as they were not encumbered with the restructuring elements⁷. On balance, notes Stuijt, the PXF lenders ended up with a more standardised PXF loan with increased pricing, albeit less security, and the bondholders were happy because they had a fully functioning liquid instrument.

The deal – following Metinvest’s posting of US$8.9bn with an EBITDA of 23% for the calendar year of 2017 – marked a return to comparative normality in the recovering Ukrainian economy, despite the latest difficulties facing Ukrainian exports as a result of lower steel prices, “weighed down by tariffs imposed by the United States” as summarised by the National Bank of Ukraine⁸.

Chinese wisdom teaches, “The toughest steel is forged in the hottest fire,” and the Metinvest story demonstrates just that. Having been through rather a lot over the years, from the austerity of the post-Soviet era, through several revolutions, national economic mayhem, military conflict and commodity price volatility, the Metinvest story demonstrates that stubborn optimism, track record – and patient financiers with a collective approach to getting repaid – keep the home fires burning.

_______________________________________

Sources

¹ Chapter 12, 20 Years in the Loan Market (Loan Market Association)

² See https://www.scmholdings.com.cy

³ See metinvestholding.com

⁴ See https://bit.ly/2LHs0s5 at metalbulletin.com

⁵ See https://bit.ly/2K11tBc at metinvestholding.com

⁶ See metinvestholding.com

⁷ See https://bit.ly/2vcvRmE at metinvestholding.com

⁸ See https://bit.ly/2uUVYzd at bank.gov.ua

• Payments Formatting Guide for high value payments – ISO 20022
• Payment Formatting Usage Guidelines – SWIFT MyStandards – ISO 20022
• General Terms and Conditions for Institutional Customers – no account
• General Terms and Conditions for Institutional Customers – Germany
• General Terms and Conditions for Institutional Customers – UK
• Payments Formatting Guide for high value payments – MT
• Fee schedule applied for Institutional Non-Adopted Clients