Letters of credit (L/Cs) feature in two of the eleven deals selected by Global Trade Review (GTR) as winners in its annual GTR Best Deals 2021.

This year, GTR's editorial team chose the market's best deals in 2020, including an oil deal for Libya's National Oil Corporation (NOC) and a digitalised end-to-end trade finance transaction for Rio Tinto, both of which featured L/Cs.

Libya's oil lifeline

Embroiled in conflict since the 2011 uprising, Libya's oil sector has faced blockades amongst other disruptions as warring factions vied for control of the country's valuable oil resources. In 2020 the sector also suffered from the impacts of the coronavirus pandemic.

Continual oil production is vital to Libya's oil-based economy, but the virus forced an NOC subsidiary to suspend operations due to the outbreak, leaving the company unable to fulfil a contract with a key counterparty. The counterparty warned it may cancel the deal if an extension on a BACB contract for trade finance from the previous year was not extended.

The award winning deal saw BACB extend a contract originally scheduled to expire in 2021. On NOC's request, BACB, along with the Central Bank of Libya and the Libyan Foreign Bank as lenders, agreed to extend the deal's tenor to 2023. The deal provides finance to state oil company NOC in the form of L/Cs and downstream payments worth US$22 million.

End-to-end digitalisation

Singapore's multinational DBS Bank was the lender in an award-winning US$18.4 million (+/- 20 per cent) steel deal that helped Rio Tinto achieve its ambition to streamline its sales processes.

The bank suggested the use of smart contracts and digitalised L/Cs and worked with platform partners, including Contour, Chinsay and essDocs, to create an end-to-end digital transaction framework, entirely free of physical documents.

This meant Rio Tinto realised its sales proceeds sooner than it would have in a paper-based trade transaction.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.