Important: FG Capital Advisors arranges asset-based repo lines through first-tier custodial banks. Non-exchange receipts are accepted only after full document review and warehouse due diligence.
Metal Repo Financing 101: Turn Warehouse Stock into Working Capital Today
Metal held under exchange warrants ties up cash that could support trade flows. A repurchase agreement (“repo”) converts those warrants into short-term liquidity while preserving price exposure. FG Capital Advisors structures these facilities for producers, merchants, and industrial end-users across the base-metals complex.
1. Structure of a Metal Repo
▪ The client transfers London Metal Exchange (LME) or CME-approved warrants, or electronic warehouse receipts, to the lending counterparty.
▪ The counterparty provides cash equivalent to an agreed advance rate against spot value (the “cash leg”).
▪ On the agreed repurchase date, the client buys back the metal at the original spot price plus an interest spread (the “repurchase leg”).
▪ Title remains with the counterparty during the term, held by an independent custodian.
▪ Daily mark-to-market protects both parties against adverse price moves.
2. Benefits Compared with a Conventional Inventory Loan
- Rapid execution. Collateral verification is straightforward once warrants are lodged.
- Market-based valuation. Screen prices determine both advance rate and margin calls.
- Limited covenants. The facility relies primarily on the quality of the collateral rather than broad corporate ratios.
- Balance-sheet presentation. Many clients record the arrangement as a sale and forward purchase rather than secured borrowing, subject to auditor guidance.
3. Commercial Terms Guide
| Parameter | Typical Range* | Comment |
|---|---|---|
| Advance Rate | 80–90 % of spot | Higher for exchange-approved brands stored in Category 1 sheds. |
| Pricing Spread | SOFR + 200–350 bp | Set at drawdown and fixed for the tenor. |
| Margin Call | Triggered when price decline exceeds haircut | Client posts cash or additional warrants. |
| Tenor | 30–180 days | Aligned with typical shipment and delivery cycles. |
*Illustrative levels observed in 2025 mandates arranged by FG Capital Advisors.
4. Collateral Standards
LME warrants or CME warrants provide clear title, brand, and warehouse location. For off-exchange material, lenders require electronic warehouse receipts plus an attornment agreement from the storage operator. The facility custodian verifies insurance, grading certificates, and warehouse audit rights before funding.
5. Risk Management Framework
- Independent daily price feeds from LMEselect or CME Globex.
- Optional futures hedging executed back-to-back with the repo tenor.
- All-risk insurance covering theft, fire, and fraud with the counterparty named as loss payee.
- Warehouse review covering capital strength, inventory control systems, and geographical risk.
6. Current Market Context (2025)
Persistent backwardation in copper and low on-warrant stocks continue to pressure trading lines. At the same time, higher base rates have widened credit spreads, raising the appeal of secured funding. Structured metal repos provide predictable access to liquidity at competitive pricing while keeping market exposure intact.
7. FG Capital Advisors: Role and Capability
FG Capital Advisors acts as arranger between clients and underwriting banks or alternative credit funds. Our metals desk delivers:
▪ Term-sheet issuance within one business day after receipt verification.
▪ Multi-currency funding (USD, EUR, GBP, RMB).
▪ Pre-arranged hedging programs paired with repo drawdowns.
▪ Real-time collateral monitoring through a secure inventory portal.
8. Frequently Asked Questions
Q: Does the client retain exposure to metal price movements?
A: Yes. The repo transfers title only as security. Price risk remains with the client unless separately hedged.
Q: Can mixed brands be financed?
A: Mixed brands are acceptable if each lot carries a valid warrant or receipt and meets exchange specifications.
Q: What options exist if market prices rise sharply before repurchase?
A: The facility can be rolled, or the client may elect to sell a portion of the collateral to settle the price differential.
This document is marketing material and does not constitute legal, tax, accounting, or investment advice. Terms remain subject to credit approval and prevailing market conditions.
