# Presentation: 546032

## Export-Import Bank of the United States 

***“******Financing U.S Exports”***
**	****	****	**
**C. Michael Forgione**
**Vice President**
**International Business Development**
** **

## 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 $450 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, medical equipment, exports to Africa, and lending *****directly *****to municipalities in certain countries.**

## 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***** usually more cost effective.**
** **
**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.***

## Blue Sky Energy, Inc.

***Blue Sky Energy, Inc*****.*****, *****Vista, CA, uses  Ex-Im Bank’s **_**Short-Term Insurance**_** to offer  “open account” credit terms to customers in Spain, Portugal, South Africa, Japan, United Kingdom, Australia, and Canada. **
***Blue Sky Energy *****makes solar energy charge controllers. **
**Patented technology allows increase in power from PV energy systems**
***Blue Sky Energy’s***** use of Ex-Im Bank Insurance is supporting their growth in exports as overseas dealers offer credit to *****their *****customers.  **
***Blue Sky Energy’s***** use of Ex-Im Bank Insurance provides risk mitigation on open account sales, and creates collateral for working capital borrowing.**
***Blue Sky Energy’s *****broker, Meridian Finance Group, works extensively with Ex-Im Bank.**
**Financing is often THE critical factor in winning an export sale in emerging markets, Open account has advantages. **
**“****Supplier credit” attractive substitute to buyer using L/Cs**
**Interest rates very high in many international markets**
**Increase order quantities to existing customers/distributors.**
**Enter new “risky” markets, attract new customers/distributors. **
***80% of sales in Europe done on open account basis***

## 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.**

## 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**

## Medical Equipment Financing Program

**Offers enhanced support for the export of U.S. medical equipment and services:**
**Extended repayment terms of 7-years (3-5-years typical)**
**Automatic 15% local cost support**
**Capitalization of interest during construction/installation**
**Explore financing alternatives for buyers to meet Ex-Im Bank’s Medium-Term Credit Standards**
**Guarantees **
**Liens and/or side collateral**
**Vendor re-marketing agreements**
**Exporter risk participation**
**Other “innovative” approaches**

## Case Study: Diagnostica da America, SA(“DASA”)

_**GE Medical Systems**_** used Ex-Im Bank’s Medium-Term Insurance program to offer 7-year financing  for the $1.3 million sale of MRI and X-Ray Mammography systems to DASA of Barueri, Brazil.**
**Extended term financing critical in this case:**
**medium-term US dollar financing scarce, expensive in Brazil**
**DASA missed several  Credit Standards, including Ex-Im Bank Exposure/Net Worth, but Ex-Im Bank approved the deal based on:**
**Highly-regarded clinic established in 1965**
**Good credit history**
**First lien on the equipment**
**Agreement with GE Medical Systems to cover repossession, refurbishment, remarketing in case of payment default**

## Loan Guarantee Process

**1. The Guaranteed Lender bank submits the application for *****Final Commitment***** under its *****Master Guarantee Agreement *****along with the required information to establish the credit limit for the foreign customer.**
**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**
**Copy of the export contract.    **
**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 Standards

**Positive Operating Profit over last 2 years**
**Positive Net Income over last 2 years**
**Positive Cash-Flow-From-Operations (latest year)**
**EBITDA/Debt Service greater than 150%**
**Total Liabilities/Total Net Worth less than 175%**
**Ex-Im Bank Exposure/Total Net Worth less than 40%**
**Borrowers that meet these standards very likely to be approved. **
**If the borrowers misses one or more of the standards, **
**Ex-Im Bank will conduct further analysis of the borrowers’ business **
**to determine whether to grant approval.**

## 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.**

## Structured Financing: Korea Solar

**Ex-Im Bank’s Loan Guarantee to *****City National Bank***** supported its 15-year, $7.8MM  financing of the 1MW solar power project in Gwangju, Korea.**
**Ex-Im Bank’s first 15-year deal under the new OECD terms.**
***Powerlight, Berkely, CA*****, will design, develop, and deploy the solar power plant, located at the Kim Dae Jung Convention Center. **
**Ex-Im Bank used the “structured finance” approach to create a reasonable assurance of repayment and support the project.**
**No outside financial advisors, limited legal fees**
**Structure of the deal included:**
**15-year guaranteed tariff rate for power sales**
**Corporate guarantees of two relatively small private-sector companies as project sponsors **
**Mortgage on the solar panels**
**Debt service reserve account**
**Financial covenants**

## 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.exim.gov](http://www.exim.gov/)**_** for a list) without prior Ex-Im Bank approval.**

## Case Study: PowerLight Corp.

**PowerLight of Berkeley, CA received a $5 million working capital loan made possible through Ex-Im Bank’s Working Capital Guarantee Program (“WCGP”).**
**PowerLight is using the working capital line of to finance the $50+ million export sale of  solar tracking technology to Bavaria Solarpark, the world's largest solar electric project!**** **
**The project will generate 10 megawatts of electricity, enough to power 9,000 homes in the region, supported by a 20-year power purchase from the German government. . **
_**[Union Bank of California](http://www.exim.gov/cftools/intercept.cfm?http://www.uboc.com)**_**, an Ex-Im Bank delegated authority lender, provided the loan and will receive Ex-Im Bank's Guarantee when the loan is processed.**
**PowerLight is using the working capital line in part to post a 10% performance bond as required by Bavaria Solar.**

## Environmental Exports Program

**Support for environmentally-beneficial exports mandated in Ex-Im Bank’s Charter. **
**Environmental Exports Program Consists of **_**pro-active**_** business development and enhancements to existing Ex-Im Bank programs.**
_**Environmental projects are offered enhancements:**_
**Maximum OECD repayment term  for Long-Term Loans and Guarantees of 10-15 years after project completion.**
**Repayment terms of 15-years for renewable energy and water treatment projects!!**
**Capitalization of interest during construction.**
**Up to 15% local cost support within the U.S. scope of supply. **
_**RESULTS: **_**Transactions approved under the Program grew from **
**     ****13 in FY 1994, to 78 FY 2005, totaling over $2 billion.**

## Conclusion

**Ex-Im Bank: top priority to support environmental exports**
**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. **
_***Internet***__***	***_***http://www.exim.gov***
_***e-mail***_***   michael.forgione@exim.gov***