Case Study: Mezzanine Note and Bank Funding for Uganda to UK Cocoa Trade
A cocoa exporter in Uganda signed a 5M USD annual supply agreement with a UK buyer. They needed working capital to aggregate beans upcountry, pay producers on time, and ship monthly into the UK. Their balance sheet could not carry a full cash margin. We structured a mezzanine note, lined up a senior bank to fund the flows, and put tight collateral controls around inventory and documents.
Outcome:
senior revolving trade facility paired with a secured mezzanine note. Confirmed LC settlement from the UK buyer. Collateral manager control over stock and documents. First draw achieved on schedule and monthly shipments funded without cash margin lockups.
Deal Facts
| Parameter |
Details |
| Commodity and Route |
Cocoa beans, Uganda aggregation to Mombasa port, ocean to UK port, containerised |
| Contract Volume |
5M USD per annum, monthly call-offs under a master purchase agreement |
| Counterparty Payment |
Confirmed documentary LC payable at sight on compliant presentation |
| Core Need |
Aggregation and shipment working capital without full cash collateral |
Key Challenges
Cyclical cash strain
Upfront cash needed for farmer payments and logistics before LC proceeds arrive.
Bank risk controls
Senior lenders wanted title control and clean documents or no facility.
Collateral standards
Need for a recognised collateral manager and defined warehouse receipts.
Country and corridor checks
Sanctions, KYC, and inspection language had to fit real port cutoffs.
The Structure We Built
| Layer |
Role and Mechanics |
| Senior Revolving Trade Facility |
Commercial bank funds purchase and shipment cycles. Title and release under collateral manager control. Repayment from confirmed LC proceeds at sight. |
| Secured Mezzanine Note |
Private credit note to bridge aggregation and logistics. Contract assignment, second charge over stock and receivables, and step-in on default. |
| Collateral Management |
Independent collateral manager at designated warehouses. Warehouse receipts, periodic stock counts, and movement releases linked to bank approvals. |
| Documentary Track |
SGS inspection, phytosanitary, fumigation certificates, clean on board bills of lading, insurance ICC A with war and strikes. LC wording pre-cleared to avoid discrepancies. |
What We Did
Structured the mezzanine note
Tenor aligned to harvest and shipment cycle. Covenants tied to borrowing base and stock turns.
Placed the senior bank
Introduced a lender with corridor appetite. Negotiated title controls and a sight LC repayment path.
Built the cash waterfall
LC proceeds to blocked collection account. Senior repaid first, mezz second, surplus to sponsor.
Redlined all documents
LC clauses, collateral manager agreement, and logistics SOP tuned to port reality and bank audit.
Funding Flow and Controls
- Exporter SPV draws on the senior revolver against eligible stock and purchase invoices.
- Collateral manager verifies grade, moisture, and bag counts. Releases cargo only against bank release.
- Shipment under documentary LC confirmed by a UK or EU bank. Presentation on first vessel.
- LC proceeds land in a pledged collection account. Bank sweeps senior exposure. Mezz sweeps next.
- Surplus and margin flow back to the SPV for the next aggregation cycle.
Results
Working capital solved
Monthly call-offs funded without cash margin lockups. Producer payments stayed on time.
Clean compliance
Sanctions and KYC cleared. Documents paid at sight with zero discrepancies on first cycles.
Bank comfort achieved
Title control and a strict waterfall gave the lender confidence to scale within the year.
Sponsor returns protected
Mezzanine filled the gap without diluting ownership. Cash cycle matched reality.
Execution Timeline
| Phase |
Work Completed |
Elapsed Time |
| Weeks 1 to 2 |
Mandate, KYC, data room, initial structure and borrowing base model |
14 days |
| Weeks 3 to 5 |
Mezzanine note terms, lender selection, collateral manager appointment |
21 days |
| Weeks 6 to 7 |
LC wording final, security documents signed, account pledges in place |
14 days |
| Week 8 |
First borrowing base certificate approved. Initial draw and aggregation start |
7 days |
Deliverables
- Borrowing base model with eligibility criteria and advance rates
- Mezzanine note term sheet and final documents
- Senior bank facility term sheet and final loan agreement
- Collateral management agreement and warehouse SOP
- LC clause pack aligned to ISBP and port realities
- Cash waterfall and pledged account control agreement
Have a cross-border supply contract and no working capital
Send your master agreement, monthly call-off plan, and current LC wording. We will return a funding route, a collateral plan lenders accept, and a timeline you can actually ship against.
Start the Process
This case study reflects a real engagement with identifying details adjusted for confidentiality. Any facility is subject to independent credit approval, KYC and AML checks, collateral controls, and executed documentation. Terms vary by lender, counterparty, and market conditions.