Public Commentary: This briefing is for professional investors and risk officers. It does not constitute legal advice or an offer to transact.

Global Commodities Repo Financing: Procedure & Cross-Border Legal Frameworks

A commodities repo is a two-legged sale-and-repurchase deal: on Day 1 the financier buys title to inventory at a discount; on Day N the originator buys it back at the strike price plus carry. Unlike securities repos, physical repos hinge on bailment, warehouse control, and cross-border security-interest perfection rather than book-entry transfers. This guide outlines the workflow, highlights the legal building blocks, and flags the touchpoints that decide real-world enforceability.

1. Transaction Workflow

Spot Leg: Financier purchases inventory at spot − haircut (10–15 % for exchange-deliverable metals; 20 %+ for softs).
Forward Leg: Originator repurchases at spot + carry ; carry references SOFR/EURIBOR plus margin.
Collateral Control: Warehouse receipts endorsed to the financier plus a tri-party control deed with the warehouse.
Margining: Daily mark-to-market with cash or substitute receipts; variation thresholds set at 105–110 % of exposure.
Exit Options:(i) repurchase, (ii) third-party sale, or (iii) physical delivery into an exchange if the commodity is deliverable.

2. ABL Underwriting Sequence

Stage	Verification Focus	Typical Tools
Counterparty KYC	UBO, sanctions, trading history	World-Check, audited statements
Collateral Audit	Receipt validity, lot numbers, weight tickets	Warehouse registry search; site visit
Assay / Re-grade	Conformity with spec (Cu cathode, RBD palm, etc.)	SGS, CCIC, Alfred H. Knight
Insurance Check	All-risks policy, war/strike extension, UMR verification	Direct broker confirmation
Legal Opinions	Perfection & priority in storage and transit jurisdictions	Local counsel; Hague Convention analysis

3. Cross-Border Legal Architecture

Legal certainty rests on three pillars:

Bailment & Possession (English law): A warehouse receipt is not a document of title; the financier’s interest relies on the warehouse acknowledging it now holds the goods for the financier.
Personal-Property Security (U.S.): Article 9 UCC treats a repo as a secured loan; perfection is achieved by filing plus possession or control of the receipt.
Emerging Harmonisation: UNCITRAL/UNIDROIT model rules and various PPSA regimes aim to standardise priority and enforcement across jurisdictions.

Where storage location, governing law, and borrower domicile differ, financiers overlay an English-law repo agreement with local pledge filings and—if transit risk exists—endorsement of negotiable bills of lading under the Hague-Visby Rules.

4. Key Documentation & Control Agreements

Master Commodities Repo Agreement (MCRA): Mirrors GMRA economics but references INCOTERMS and ICSID arbitration.
Tri-Party Control Deed: Warehouse undertakes not to release goods without financier’s written consent; dual-key custody if feasible.
All-Risks Marine & Storage Policy: Loss-payee endorsement in favour of the financier; limits ≥ 110 % of notional.
Parent Guarantee / SBLC: Covers price risk and operational performance during the repo tenor.
Local Security Filings: UCC-1, PPSA statement, or civil-law pledge registration to defeat trustee-in-bankruptcy claims.

5. Risk Controls & Best Practice

Accept only exchange-listed grades or mainstream agri specs; obscure forms invite valuation disputes.
Use accredited storage sheds; non-listed warehouses elevate fraud risk.
Verify receipt numbers directly with the warehouse or regulator; never rely on borrower-supplied scans.
Set variation-margin triggers at 105 %; intraday top-ups via trusted payment rails only.
Engage local counsel early; the cost of dual filings is trivial compared with enforcement friction.

Next Step

Contact FG Capital Advisors for a jurisdiction-specific repo term-sheet template and a detailed due-diligence checklist.

This guide is informational. Independent legal and risk advice is essential before entering any commodities-repo transaction.

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