Two of the world's largest trading houses, Vitol Group and Cargill Inc., have ceased doing business with Radiant World after discovering that invoices or other documents the firm supplied to its banks were not valid, according to people familiar with the matter. A third major trader, Glencore Plc, has also pulled back from initiating new trades with Radiant World as it closely watches developments.
Sources said the concerns arose when counterparties reviewed trade papers Radiant World had used to obtain financing and found some items that could not be authenticated. Another person familiar with the situation said Glencore's decision to avoid new business followed internal warnings among industry traders about potentially falsified documents that Glencore considered credible.
Radiant World, a private company that has rapidly grown into a significant iron ore trading house, has built that expansion on credit facilities provided by a network of banks and credit funds. Those financing arrangements have frequently been backed by trade documents such as invoices and shipping receipts, and the reported questions over the validity of some of those papers have prompted scrutiny from lenders.
At least two creditors are reassessing their exposure to Radiant World. Intesa Sanpaolo SpA and Jefferies Financial Group Inc.'s Point Bonita fund are said to be reviewing their positions, according to people with knowledge of the matter. Intesa has recorded a provision against its exposure to Radiant World, the bank said in a statement to reporters.
Radiant World issued a direct denial of the allegations. The company said: "These accusations are categorically untrue. Radiant World’s trading relationships are healthy and uninterrupted." Despite that statement, sources noted that Vitol and Cargill have not traded with Radiant World for several months, and that Glencore is refraining from entering into new business with the firm while monitoring the situation.
Summary of the situation
- Two major trading houses stopped dealing with Radiant World after finding trade documents provided to banks were invalid.
- A third trader paused new business following industry warnings about possibly falsified documents.
- Creditors that provided financing backed by trade papers are reassessing and, in at least one case, taking a provision.
Context and immediate implications
The developments have prompted lenders and trading partners to re-evaluate exposure to a private firm that has scaled rapidly in the iron ore market. Actions reported include cessation of trading by some counterparties, a halt to new transactions by another, and active reviews by creditors that underwrote its growth with document-backed credit lines.
What Radiant World says
The company disputes the claims and maintains its trading ties are intact, characterizing the accusations as untrue. The competing accounts from industry participants and the company's statement underline the unresolved nature of the concerns.
Current state
Sources indicate Vitol and Cargill have not engaged in deals with Radiant World for several months, while Glencore has not been initiating new business as it monitors the situation closely. At least two creditors are reviewing their exposures, and Intesa has taken a provision on its exposure.