Thursday, 13 August 2009

This collateral smells a bit off

From Bloomberg:
The vaults of Credito Emiliano SpA hold the pungent gold prized by gourmands around the world -- 17,000 tons of parmesan cheese.

The regional bank accepts parmesan as collateral for loans... [its] two climate-controlled warehouses hold about 440,000 wheels worth 132M Euros...

The bank offers loans for as long as 24 months, equal to the time it takes the parmesan to age, at the euro interbank offered rate, plus 0.75-2%.
I love commodities finance. Particularly when you can eat the collateral if the loan goes bad.

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2 Comments:

Blogger Charles Butler said...

The carry trade version is to take your olive delivery receipts to the bank financing at 0.75% flat, withdraw the cash and walk it over to the one offering a nine month TD at 4%.

10:49 am  
Blogger David Murphy said...

Oh, very nice. There are similar gigs in commodities finance, notably oil, but it's basically a fee paid by those who do not have enough storage. Do you get crushed (if you will forgive the pun) in the olive version if the harvest is bad, or is it a shorter term play than that?

1:49 pm  

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