# Presentation: 358762

## Financing Air & Waste Management Technology Exports

**Craig O’Connor**
***Environmental Liaison Officer***

## U.S. Ex-Im Bank

**Independent agency of the U.S. government. **
**Established in 1934 to finance the export sales of goods and services produced in the U.S.**
**Since 1934, has supported over $400 billion in exports. **
**Supports short, medium, and long-term financing to **_**creditworthy**_** international customers both public- and private-sector; working capital guarantees to U.S. exporters.**
**Products include Direct Loans, Guarantees, Export Credit Insurance, Working capital Guarantees, Tied Aid Fund.**
***No minimum nor maximum project size.***
**Special initiatives for environmental exports, small business, and lending *****directly *****to municipalities in certain countries.**

## Environmental Exports Program

**Support for environmentally-beneficial exports mandated in Ex-Im Bank’s Congressional Charter. **
**Environmental Exports Program (“EEP”) consists of **_**pro-active**_** business development + enhancements to Ex-Im Bank programs.**
**Environmental projects are offered enhancements:**
**Maximum OECD repayment term  for Long-Term Loans and Guarantees of 10-12 years after project completion.**
**Capitalization of interest during construction.**
**Up to 15% local cost support within the U.S. scope of supply. **
_**RESULTS: **_**Transactions approved under the Program have grown from 13 in 1994, to 71 in 2004, totaling over $1.5 billion.**
**Strong partnerships with Departments of Commerce, *****Ecolinks, *****USEPA, and trade associations. **

## Ex-Im Bank Value Proposition

_**What does Ex-Im Bank bring to the table?**_
**Ability to directly extend credits to municipalities, utilities, environmental companies, and government agencies**
**Ability to support small projects: No minimum project size helps smaller in-country deals...**
***AstroPower *****used Ex-Im Bank to extend a $9,000 credit line to a solar homes systems dealer in South Africa**
**Ability to support loan repayment terms of 12 years **
**Ability to support interest rates based on small spread over commercial banks cost of funds (U.S. $ LIBOR)**
**Ability to help leverage USAID, GEF and other donor funds**

## Export Credit Insurance

**Enables U.S. exporters to offer short- and medium-term *****credit directly to their customers. ***
**Export credit is an attractive substitute to cash-in-advance, letters of credit and costly local bank financing.**
**Using Ex-Im Bank to *****insure a letter of credit instead of paying bank confirmation charges***** is usually more cost effective.**
***Example: Insurance costs 0.11% or $110 for a $100,000 sight letter of credit vs. $2,500 minimum bank confirmation charge.***
** **
**Supports repayment terms up to 180 days beginning from date of importation of the goods; capital goods terms of 360 days-7 years. **
**Only an invoice of the sale needed for short-term credit; Ex-Im Bank provides a promissory note to document medium-term credits. **
***Insurance lowers reserve requirements for commercial banks.***

## Case Study: Kimre, Inc

***Kimre, Inc.***** a maker of air pollution control filters uses Ex-Im Bank’s **_**Short-Term Insurance**_** to offer 60-day “open account” credit terms to customers in Europe and worldwide. **
**Premium rate for 60-day credit is 0.75%**
**Replaces costly local bank financing and/or payment by L/C’s, enables customers to offer credit to *****their *****customers.  **
**According *****Kimre’s***** Controller Ms. Elizabeth Mosca, **
**“****Ex-Im Bank’s Insurance has provided us with the ability to offer open account credit instead of L/C’s which are costly and time consuming.  Second, the Insurance on our foreign receivables has enabled our bank to increase our credit lines which we needed to grow our business.” **

## Short-Term Credit Process

**1. The U.S. supplier submits the application along with the required information to establish a credit limit for the foreign customer to Ex-Im Bank.**
**2. The information requirements from the foreign company for credit limits are as follows: **
**$10,000 credit a favorable trade or bank reference.**
**$10,000-$50,000 credit a current credit report.**
**$50,000-$100,000 credit a current credit report plus a favorable bank or trade reference.**
**Over $100,000 credit a current credit report, latest 3 years financial statements, and references.   **
**3. Ex-Im Bank’s Loan Officer analyzes the application and makes a decision on the amount of credit to be supported.**

## Medium-Term Credit Insurance

**Medium-Term Export Credit Insurance has the following features:**
**Repayment terms of 1-5 years, with 7-year terms for environmental projects over $350,000.**
**The credit must be evidenced by a valid and enforceable promissory note. **
***Ex-Im Bank provides exporter/bank with a note to use. ***
**100% coverage against commercial and political default. **
**The buyer makes a 15% down payment to the exporter.**

## Medium-Term Credit Insurance Process

**1. The U.S. supplier or their bank submits the application along with the required information to establish a credit limit for the foreign customer to Ex-Im Bank.**
**2. The information requirements from the foreign company for Medium-Term credit limits are as follows: **
**A current credit report.**
**A current commercial bank reference.**
**Latest 3 years financial statements; interim statements if the latest year’s financial statement is older than 1 year.**
**Note: audited statements required for credits over $1MM    **
**3. Ex-Im Bank’s Loan Officer analyzes the application and makes a decision on the amount of credit to be supported.**

## Case Study: Tire Recycling in Mexico

_***Sorbilite, Inc. ***__**of Virginia Beach, VA**_** is using Medium-Term Insurance to arrange financing for the export of a $2.35MM tire recycling facility.**
***Refaccionaria Valati, S.A. *****of Ciudad Juarez purchased the facility to recycle used tires into saleable items (rubber mats, moldings,etc.).**
***R*****eceived the maximum allowable OECD repayment term of 7-years under Ex-Im Bank’s *****Environmental Exports Program*****.**
***Wells Fargo Bank***** made the loan at an all-in-cost under 5% per year with 100% repayment insurance from Ex-Im Bank.**
**The insurance premium - *****a one-time flat charge*****- set at 3.80% and financed as part of the 7-year credit (0.54% on a per year basis).**
_***Driving factor for this deal:***__** **_**With access to medium-term credit in Mexico unavailable at economically viable terms, the 7-year loan enabled *****Refaccionaria Valati, S.A*****’s expansion into tire recycling.**

## Loan Guarantee Program

_***Guaranteed Loans***_** made by commercial banks (U.S. or foreign) to a foreign buyer with a 100% *****unconditional *****repayment guarantee from Ex-Im Bank **
**Guarantee covers 85% of the U.S. content of the transaction**
***Negotiated***** interest rates, usually a floating rate based on spread over 6-month U.S. dollar LIBOR rate**
**Loan fully transferable, can be securitized**
**Banks often finance the 15% required cash payment**
**Guarantee available in major foreign currencies**

## Case Study: China Air Quality

**Ex-Im Bank enabled *****Daisibi Environmental Corp*****. to win a $5.2MM contract for air quality monitoring stations in 11 Chinese cities. **
**Ex-Im Bank supported enhancements to the Loan:**
**maximum allowable OECD repayment term of 10 years**
**capitalized interest during construction**
**15% local cost. **
***Bank of America***** (“B of A”) structured an *****interest rate***** “buydown” of 3.9% critical for the transaction approval.**
**Ex-Im Bank provided a guarantee to B of A who made the loan to the *****China Construction Bank***** who financed the deal for *****China’s State Environmental Protection Agency.***

## What Can Ex-Im do for “Small” Projects?

**Ex-Im Bank can make a credit decision about a potential project in one of three ways:**
**1)****      ****Based strictly on the balance sheet of the borrower or a guarantor;**
**2)****      ****As limited recourse project finance with a special purpose company borrower and project cash flows as the source of repayment;**
**3)****      ****Or, as a structured finance transaction with the borrower’s balance sheet enhanced by special features.**
**Many projects are too large to be feasible strictly on a balance sheet... but too small to merit the time and expense associated with project finance transactions. **
**“****Structured” finance may be an alternative.**

## What Makes a Financing “Structured”?

**Structured finance involves elements of both corporate and limited recourse project finance.  Like corporate finance, it involves full recourse to the project sponsor’s balance sheet. **
**Like project finance, it involves special features to enhance the credit of the borrower, including (but not necessarily limited to) one or more of the following: **
******  ****Special purpose accounts, including offshore payment accounts, escrow or reserve accounts, or other accounts that would be subject to Ex-Im Bank’s control;**
**2.****     ****Covenants and default provisions such as financial ratios or debt service coverage requirements that would, if violated, prevent payment of dividends to the sponsors;**
**3.     Insurance requirements that might be more strict than those typically applicable under corporate insurance policies; **
**4.    **** ****Letters of credit or other sources of funds that would be pledged by the sponsor to Ex-Im Bank through a bank or other third party.**

## New Initiative: Sub-sovereign Lending

**Recognizes emerging market for U.S. environmental firms: foreign cities, states, and other sub-sovereign government entities.**
**Ex-Im Bank supports Loans/Guarantees to sub-sovereign entities:**
**foreign currency debts are not in default **
**rated B/B2 or stronger by accepted global credit rating agency.**
**The global credit rating agencies whose ratings may be used:**
**Standard & Poor’s, Moody’s, Duff & Phelps, Fitch/IBCA, and Japan Credit Rating. **
**New initiative immediately qualifies subsovereign entities in: **
**Argentina, Brazil, Bulgaria, China, Colombia, Croatia, the Czech Republic, Estonia, Latvia, Malaysia, Poland, Slovakia, and South Korea.**

## Working Capital Guarantee

**Ex-Im Bank provides 90-100% repayment Guarantee for working capital loans, revolving or transaction based, made by commercial lenders to small businesses to finance export sales.**
**The Working Capital Guarantee serves as the collateral to the commercial lender by mitigating the risk inherent when the source of repayment for the loan is an overseas contract.**
**Enables exporters to finance materials, labor, and overhead to produce goods/services for export.**
**Enables exporters to cover standby letters of credit for bid and performance bonds, or payment guarantees.**
**Enables the exporters to finance foreign sales receivables.**
**Most Working Capital Guarantees provided by Delegated Authority Lenders (see **_[www.](http://www.exim.gov/)__[exim](http://www.exim.gov/)__[.](http://www.exim.gov/)__[gov](http://www.exim.gov/)_** for a list) without prior Ex-Im Bank approval.**

## Case Study: Taiwan Air Pollution Control

**Ex-Im Bank’s WCGP made a number of working capital loans to Anguil Environmental to support its export sales. **
**Ex-Im Bank’s WCGP made possible a $1.25MM loan to Anguil Environmental from Firststar Bank to support a $2.9MM contract with Formosa Chemical and Fibre Corp.**
**Formed in 1978 by Mr. Gene Anguil, the company designs, builds, and installs custom-built industrial pollution control systems.**
**Ex-Im Bank’s WCGP critical in this case given that Anguil is a small business with limited resources, and the source of repayment an overseas contract.**

## Conclusion

**Ex-Im Bank supports short, medium, and long-term financing to **_**creditworthy**_** international customers, and working capital guarantees to U.S. exporters.**
**Ex-Im Bank enables U.S. exporters to arrange the *****most attractive source of credit directly for their customers.***
**Ex-Im Bank’s programs provide the most attractive financing option for foreign small- and medium-sized firms to purchase of U.S. goods and services. **
**Ex-Im Bank is interested in any size project. **
- _[http://www.exim.gov](http://www.exim.gov/)_
***Craig.oconnor@exim.gov***