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Hommocks | Private Credit

Hommocks Private Credit Parameters

Welcome to an opportunity to become a direct private credit lender to commodity trade finance deals!  You are lending directly to commodity traders together with Hommocks as a partnering co-lender. 

Commodities:          oil & gas, agricultural goods, metals

Type:                      transactional, secured working capital finance with a pledge of                                               inventory/receivable.

Structures:              goods-in-transit voyage finance, receivable finance, pre-export,

                               supply chain finance, warehouse finance, prepayment loan, others

Deal amount:          $100,000 - $500,000 per shipment that continuously repeats and may                                   overlap.

Facility limit:           $2 – 5 million.  Overlapping Deals cannot exceed this Facility limit.

Tenor:                     30 – 90 days

Lenders:                 Unitranche loan per Deal.  85% of loan provided by senior lender (non-                                fractional) and 15%, junior lender.

Advance rate:         Typically 80% of shipment value.

Non-commital:        Lender lends on uncommitted basis.

Geography:             loans are made to borrowers globally.

Track record:           borrowers or their managers must have many years of experience and                                 a solid track record. 

Interest rate:           senior secured lender’s target interest rate ranges between 10% - 15%                                 per annum.  SOFR index plus a margin.  Floor SOFR of 3.5%pa.                                           Interest is paid in arrears.  Use actual/360 day convention to calculate                                   interest.    

Unitranche Loan:

Unitranche Loan

Your funding provides the senior secured tranche that funds 85% of the loan amount.

Hommocks provides the junior secured tranche that funds 15% of the loan amount.

 

Your senior secured loan and Hommocks junior secured loan combined is called a unitranche loan.

 

Interests of the senior lender and junior lender are aligned.  They both seek the loans to perform properly.

You have Hommocks as a strong, professional partner to structure and arrange the loan.  

If a loan defaults, senior lender is paid out first from any loan recoveries before Hommocks.  You are at the top of the waterfall pools!

Eligible Senior Lender

  • Minimum of $100,000 for private credit senior lender’s loan amount for each deal.

  • Non-US lenders are also welcome in addition to US lenders. 

  • Each lender must assess and understand risks associated with the private credit loans.

Deal Opportunities

Facility 1: Spanish cocoa receivable finance

  • Hommocks is seeking private credit lenders to participate in a $1.5 million short term receivable finance facility for a Spanish cocoa processor / trader.

  • Each loan amount is approx $50,000 - $100,000 on shipment of cocoa powder from Spain to 4 – 5 buyers mainly in Northern Africa (Morocco, Algeria, Tunisia).

  • Each receivable finance loan is for 30 – 60 days on uncommitted, transactional basis and continuously recurs. 

  • Each loan has an advance rate of 90% on the shipment value.

  • Buyer non-payment risk is covered with Coface Spain credit insurance. 

  • Up to 10 loans may overlap but cannot exceed $1.5 million in aggregate.

  • Full recourse to Borrower upon non-payment by Borrower. 

  • Hommocks will a) document the agreements, b) book and administer the loans and c) monitor the receivables.

  • Senior lender may ‘cherry pick’ the loans that he/she wishes to lend to. 

  • Limited to one senior lender for one corresponding Deal, which in turn corresponds to one shipment.

  • Borrower was founded in 2013 and is located in northern Spain. 

  • Borrower’s business activity is to a) import cocoa liquor and cake from West Africa, b) process and produce 3,000 to 5,000 metric tons of cocoa powder annually and c) export final cocoa products to customers mainly in Northern Africa.
  • Borrower annual sales $2.5 million, total assets $4 million, equity $0.8 million.

  • Interest rate is SOFR + 8%pa with Floor SOFR of 3.5%pa.  Current SOFR is approx 5.3%pa. Thus, all in rate is 13%pa (= 8% + 5.3%) at current SOFR rate. 

  • Interest is payable by Borrower in arrears for each short term loan. 

Facility 2: Turkish tobacco trader working capital facility

  • Hommocks is seeking private credit lenders to participate in a $1.75 million short term commodity working capital facility for a Turkish tobacco trader.

  • Each deal amount is $200,000 on shipment of tobacco leaves from India to Antwerp, Belgium.

  • Hommocks is seeking a private credit lender to advance $136,000 (ie 68% advance rate) per deal as a senior secured lender.

  • Hommocks, a junior subordinated lender will advance $24,000 (ie 12% advance rate) per deal as a co-lender. 

  • Up to 4 deals may overlap but cannot exceed $1.75 million in aggregate.

  • Each deal (ie shipment) is for a total duration of approx 90 – 120 days.

  • Each deal is on uncommitted, transactional basis and continuously recurs. 

  • Investor selects the deal (ie shipment) that he wants to finance.

  • Each deal is comprised of 3 phases. 

  • First Phase is pre-shipment financing of approx 14 to 21 days in India.  This phase has performance risk exposure to the Indian supplier, ITC Limited, a large Indian industrial conglomerate group company.

  • Second Phase is ocean voyage finance from India load port to a warehouse in Antwerp, Belgium for a duration of up to 60 days.

  • Third Phase is warehouse finance in Antwerp, Belgium for a duration of up to 30 days. 

  • Shipped tobacco is pledged as collateral to the Lender.

  • Established in 2008, Borrower is a reputable tobacco producer and trader with over 120 employees. 

  • Borrower’s total assets $4.5 million, annual sales $2.8 million.

  • Borrower has 7 years of strong relationship with the Indian supplier, ITC. 

  • Borrower has purchased 4 - 5 shipments from ITC every year with satisfactory performance on quality and quantity.

  • Full recourse to Borrower upon non-payment by end buyer, non-performance by ITC. 

  • Senior Lender interest rate is SOFR + 12%pa.  Current SOFR is approx 5.35%pa.  Thus, all in rate is 17.35%pa (=12% + 5.35%) currently.  There will be a floor SOFR of 3.5%pa. 

Facility 3: US steel scrap trader voyage finance facility

  • Hommocks is seeking private credit lenders to participate in a 3 million short-term asset based loan facility for a steel scrap metal trader based in Houston.

  • The borrower specializes in various steel scrap products such as frac block, forging drops scrap, rail wheel scrap, prepared rebar scrap, shredded scrap, etc.

  • $3 million asset based loan facility to provide 30 to 60 day, goods-in-transit financing of frac blocks or other scrap steel metals (in containers).

  • Shipments are from the US (Houston, Chicago, Detroit) scrap yards to India discharge port.

  • Established in 2023 in Houston, the borrower is a US frac block scrap metal exporter.

  • Borrower’s principal has over 15 years of experience in this niche business.

  • Borrower pays domestic US suppliers 3 days after delivery of scrap metal at scrap yard.

  • Borrower receives repayment from end buyer on Cash-against-Documents basis at an Indian discharge port (receives payment prior to title release).

  • Back-to-back transactional finance with steel scrap metal pledged as collateral.

  • Each advance (“Deal”) is up to 60 days for $200,000 - $2 million per shipment.

  • Up to 5 Deals may overlap.

  • Total aggregate outstanding amount of the 5 Deals at any point in time cannot exceed the $3 million credit facility amount.

  • Each Deal shall be funded 20% by Borrower and 80% Unitranche Loan.

  • The secured Unitranche Loan is comprised of 85% senior loan tranche and 15% Hommocks' junior loan tranche.

  • Hommocks will document the agreements and book/administer the loans.

  • Full recourse to Borrower upon non-payment by end buyer. 

  • Senior Lender interest rate is SOFR + 10%pa.  Current SOFR is approx 5.35%pa.  Thus, all in rate is 15.35%pa (=10% + 5.35%) currently.  There will be a floor SOFR of 3.5%pa. 

Yes, please send me more information

Why invest in commodity trade finance?

Commodity trade finance has many positive attributes favored by many investors:
 

  • Direct loans.

  • Uncorrelated with, and unaffected by, market volatility.

  • Unaffected by inflation.

  • Short term duration, typically 30 to 90 days per loan.

  • Uncommitted.

  • High yield.

  • Backed by receivables and inventory as source of repayment.

  • Low default rate : investment grade characteristics.

  • Recurring, transactional deals.

Frequently Asked Questions

Do I get to choose each Deal? 

Yes.  Each Deal is financing a commodity shipment on transactional basis.  One deal = one shipment = one loan.

 

How long does each Deal last? 

Each Deal is typically within the range of 30 to 90 days.

 

How much do I earn on each Deal? 

Approx 10% - 15% per annum per loan.  The risk profile of a Deal will largely remain unchanged.  Thus, the next loan for the same Borrower with same supplier and end-buyer will have the same interest rate. 

Will the interest rate pricing be the same for all Borrowers?

No.  Each Borrower's loan facility will have different structures and different risk profiles.  Thus, pricing will will not be the same and be adjusted.

How is interest on my loan calculated?

Let’s assume your loan amount is $150,000, interest rate is 12.5% per annum and the loan tenor is for 40 days.  Your interest amount is $2,083 = $150,000 x 12.5%pa x 40/360 days.  This interest amount will be paid to you in arrears on the loan maturity date.

 

Describe a ‘typical’ commodity trade finance Deal.

The trader (ie borrower) needs to pay the supplier of a commodity product at the load port.  The trader only gets paid from the end-buyer at the destination port.  The trader needs working capital finance during the 30 - 90 day voyage period.  The inventory product on the vessel during the voyage period is the loan collateral for the trader to borrow from the lender.  Loan start date is when payment is made to the supplier.  Loan maturity date is when payment is received from the end-buyer.

 

Do I execute each loan and be repaid for each loan? 

Yes.  On loan start date, you wire the funds to Hommocks.  On the loan maturity date, Hommocks wires the funds back to you.  You may ‘park’ your funds with Hommocks until the next Deal (ie next shipment).

 

Can I invest in multiple Deals simultaneously? 

Yes.  One Borrower may be making multiple shipments that overlap.   Each shipment will require a separate corresponding loan and multiple loans may overlap.  A senior lender may lend to finance, say, 2 shipments for one Borrower and 1 shipment for another Borrower. 

 

Will I be the only senior lender on one Deal? 

Yes, Each Deal’s senior loan is financed by one senior lender.  No fractional senior loan participations.

 

Can I back out of a Deal once disbursed? 

No.  Once the loan is disbursed for a Deal, you must wait 30 – 90 days until the loan maturity date.  However, you are not obligated to disburse on the upcoming, undisbursed loan.  It is at your option to extend a loan for the next shipment of a Borrower.  Note, many lenders opt to continuously execute loans of the next shipments.

 

Do I have on-line access to my loan account?  Do I receive loan statements?

Yes and Yes.  Hommocks will book all loans in an on-line loan management system.  Lender will have on-line access to its loan balance and interest calculations.   A loan statement will be issued and sent by email every month end. 

 

Is this an investment to buy shares of a commodity trader? 

No.  These are ‘loans’ advanced to the commodity trader and are reflected as debt for the commodity trader.  These investments are not purchase of shares nor security.  These investments are not subscription & redemption of shares.    

 

Will Hommocks pay me back upon a loan event of default? 

No.  You as a senior lender will incur a loss if a borrower defaults and loan recoveries are unsuccessful.  Hommocks will also incur a loss upon such an event.  Nonetheless, Hommocks will make every effort to resolve the default on behalf of the senior lender and spearhead the effort to recover losses. 

 

How are deals originated and selected by Hommocks?

Hommocks screens each deal carefully through a list of borrower on-boarding checklist.  Each deal must meet stringent Know-Your-Customer due diligence.  Hommocks will have direct contact with the decision maker(s).  Hommocks will have visited the Borrower and conducted facility inspections and reviewed operational policies.

 

What are the steps for me to extend the loan?

Step 1: Express your interest in the summarized deal to Hommocks. 

Step 2: Sign confidentiality agreement with Hommocks. 

Step 3: Receive loan presentation (10 – 15 pages) and draft loan agreement. 

Step 4. Respond in 2 business days of your interest to lend (“Letter of Intent”). 

Step 5.  Loan start date will be 3 – 10 business days upon Hommocks receipt of Letter of Intent. 

Step 6. On the loan start date execute loan ticket and remit loan proceeds to Hommocks. 

 

How often do you face defaults?  How often is collateral seized and liquidated?

Expectation is never.  Defaults are rare.  Even if the borrower becomes bankrupt, the pledged collateral will be liquidated and become a source of repayment. 

 

What are the main risks in commodity trade finance?

Counterparty Risk (financial strenght, track record, disclosure quality), Fraud Risk (fabricated documentation, money laudering, Ponzi schemes), Operational Risk, Financial Risk (price fluctuation, currency devaluation), Country Risk (political risk, legal risk), Collateral Risk (liquidity, damage, contamination)

 

Are the loans subject to SEC registration?

No.  The loans are not investments into securities. 

Notice

Hommocks LLC (“Hommocks”) operates the Hommocksfinance.com website (the "Site"). Hommocks is not a broker-dealer or investment advisor.

 

Each lender should speak with its financial advisor, accountant and/or attorney when evaluating any offering. Hommocks does not make any recommendations or advice about investments, and no communication, through this website or in any other medium, should be construed as a recommendation for any security offered on or off this investment platform.

 

The Site may make forward-looking statements. You should not rely on these statements but should carefully evaluate the offering materials in assessing any lending opportunity, including the complete set of risk factors that are provided as part of the offering circular for your consideration.

 

Past performance is no guarantee of future results. Lending opportunities such as those on this Site are speculative and involve substantial risks to consider, outlined in the respective offering materials and including, but not limited to, illiquidity, lack of diversification and complete loss of capital. Key risks include, but are not limited to, limited operating history, limited diversification and risk of asset damage or theft.

 

The motivations of Hommocks as lender and administrative agent are commercial in nature and not to invest in the general performance or operations of the Borrower.

 

In participating as a lender, each lender agrees that it has, independently and without reliance on Hommocks, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and the loan opportunity and decision to enter into a loan agreement and make, acquire or hold commercial loans (and not for the purpose of investing in the general performance or operations of the Borrower) and that it will, independently and without reliance upon Hommocks, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under a loan agreement.  Each lender agrees not to assert a claim in contravention of the foregoing, such as a claim under the federal or state securities laws. 

 

Lenders should carefully review the risks located in the respective offering materials for a more comprehensive discussion of risk.  For offerings that have not yet been qualified, no money or other consideration is being solicited and, if sent in response, will not be accepted. An indication of interest involves no obligation or commitment of any kind.

 

Lending overviews contained herein contain summaries of the purpose and the principal business terms of the lending opportunities. Such summaries are intended for informational purposes only and do not purport to be complete. 

 

These loans are not insured by the Federal Deposit Insurance Corporation (FDIC).

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Hommocks LLC

Mamaroneck, New York, USA

Cell/Text: 914-414-2171

jun@hommocksfinance.com

www.hommocksfinance.com

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Nothing on the site is an offer or solicitation to buy or sell any security. Although the site may include investment-related information, nothing on the site is a recommendation that you purchase, sell or hold any security or other investment, or that you pursue any investment style or strategy. We do not give any advice or make any representations through the site as to whether any security or investment is suitable for you or will be profitable.

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