# Presentation: 569594

## Ex-Im Bank:Trade Financing Solutions

## Ex-Im Bank Introduction

-  	Export-Import Bank (Ex-Im Bank) is an independent agency of the United States Government
- Established in 1934
- Headquartered in Washington, DC
- 7 regional U.S. offices

## Ex-Im Bank Introduction (cont’d.)

- Official export credit agency of the United States
- Mission: assist in financing the export of U.S. goods and services to international markets
- Does not compete with private sector lenders, but provides export financing products that fill gaps in trade financing
- Assumes credit and country risks that the private sector is unable or unwilling to accept

## U.S. Exports to Sub-Saharan Africa (SSA) Have Increased

- U.S. exports increased by 28% to $13.6 billion in the first nine months of 2008 from the same period in 2007
- Top Growth Sectors:
- Machinery
- Wheat
- Vehicles and parts
- Electrical machinery (including telcom equipment)
- Aircraft
- Non-crude oil
- Top Export Destination Growth:
- South Africa increased 18%
- Nigeria increased 55%
- Angola increased 69%
- Ghana increased  43 %

## Ex-Im Bank’s Commitment to  Supporting Transactions in Africa

- Since 1999, Ex-Im Bank has supported over $4.8 billion in transactions throughout SSA
- For fiscal year ended September 30, 2008, Ex-Im Bank supported 133 transactions totaling $575 million in 20 SSA countries
- Total SSA exposure is $2.6 billion

## FY 2008 Ex-Im Bank SSA Data, Dollar Value

## FY 2008 Ex-Im Bank SSA Data, 20 Countries of Business

## Ex-Im SSA Initiative 

- SSA is a priority region, as outlined by Ex-Im’s Charter
- Establishment of SSA Advisory Committee
- Africa Business Development Group
- Africa Newsletter to for U.S. exporters and African buyers (available on-line at www.exim.gov/africa)
- Short-Term Insurance Pilot Program (STIPP) makes insurance available to exports to 19 SSA countries that would otherwise be ineligible for Ex-Im support
- $1 billion Nigerian Banking Facility (NBF) and $40 million Special Delegated Authority (SDA) with the African Export-Import Bank (Afreximbank)
- Foreign Currency Guarantees
-  CFA Franc, S. African Rand

## How Ex-Im Bank Can Assist You

- Short-Term Accounts Receivable Financing

- Medium-Term &
- Long-Term Financing

- Export Credit Insurance

_*Your Needs*_*              *_*Our Solutions*_

- Export Credit Insurance or Commercial Loan Guarantees; Project/Structured Finance; Transportation

- Pre-export financing

- Working Capital Guarantee

## Benefits to International Buyers

- IMPROVED CASH FLOW
- LOWER INTEREST RATES
- EXTENDED TERMS
- ESTABLISH CREDIT RECORD

## Each country is open in different sectors and terms

**http://www.exim.gov/tools/country/country_limits.cfm**

## Where is Ex-Im Bank Available in SSA?

- Short-Term: 44 SSA countries
- Medium-Term: 29 SSA countries
- Long-Term: 16 SSA countries

## US Content Policy

- Export must be exported from the United States
- 51% U.S. content for short-term transactions
- up to 85% U.S. content for medium/long-term transactions (OECD driven)
- Services must be performed by US-based personnel, either in the US or in the “host” country

## Short-Term Export Credit Insurance is Rather Straightforward

**U.S.**
**Supplier**

**EX-IM**
**Bank**

**Foreign**
**Buyer**

**Payment**

**Goods and Services**

**Insurance****Application**

## Short-Term Export Credit Insurance – U.S. Content Requirements

- 	For Short-Term products, the gross shipment must have at least 51% U.S. content to support the entire transaction. For Medium Term transactions, U.S. Content must be 85% of the Net Contract Price.
- 	Products must be manufactured in and shipped from the U.S.

## Short-Term Credit Standards

- 	U.S. supplier submits application along with required information to establish credit limit for foreign buyer.
- 	Info requirements from foreign company for credit limits:
- _$10,000 credit_: favorable trade or bank reference
- _$10,000-$50,000 credit_: current credit report
- _$50,000-$100,000 credit_: current credit report plus favorable bank or trade reference
- _Greater than $100,000 credit_: current credit report, latest 3 years financial statements, and references

## A Medium/Long-Term Loan Guarantee Involves More Players

**U.S.**
**Supplier**

**Ex-Im**
**Bank**

**Foreign**
**Buyer**

**Bank:**
** ****US/ **
**International**

**Payment**

**Goods & Services **

**Insurance/Loan Guarantee**
**Application**

**   ****Financial   Documentation**

**Loan Repayments**

**Ex-Im Bank Guarantee**

## Medium/Long-Term Foreign Content Policy

-    For medium- and long-term financing, Ex-Im Bank will support the following amounts:
- 85% of the contract price if eligible foreign content is 15% or less
- Greater than 15% eligible foreign content, Ex-Im will support U.S. content only

## Medium/Long-Term Foreign Content Policy

**95%**

**U.S. Content**

**Eligible Foreign Content**

**Ex-Im support available for ****85%**** of contract price**

**Ex-Im support available for 60% of contract price**

**Company A**

**Company B**

**5%**

**60%**

**40%**

## This is a Standard Medium/Long-Term Financing Model

- Net contract price       	       $   1,000,000
- Cash payment (15%)	          _   (150,000)_
- Financed portion     	       $      850,000
- Exposure fee @ 10%                    _*  *__ +85,000_
**Total financed                       $  **_**  935,000**_

**Notes:**
We will be discussing three types of finance models:  the standard finance model, foreign content models with eligible and ineligible content and the Local Cost finance models.

As you can see, under the standard Exim financing scheme, there will be 85% financing; repayment will begin six months from the appropriate starting point, and, unless there is a lease involved, there will be level principal payments.
The exposure fee can be financed as well, in this example, a 3% fee is assumed, creating a total finance portion of $875,000.
Full payout is required and bullet (or delayed large principal payments) are not allowed.

## Sample Medium/Long-Term Credit Standards

- Positive Operating Profit during last 2 years
- Positive Net Income during last 2 years
- Positive Cash-Flow-From-Operations (latest year)
- EBITDA/Debt Service > 150%
- Total Liabilities/Total Net Worth < 175%
- Ex-Im Exposure/Total Net Worth < 40%

## Direct Loans are becoming more common

| Repayment Term | CIRR Rate* |
| --- | --- |
| Up to 10 Semi-Annuals (S/As) | 2.07% |
| > 10 S/As up to 17 S/As | 2.52% |
| > 17 S/As | 2.89% |

***Commercial Interest Reference Rate is for January 15, 2009 - February 14, 2009**

- Transactions are normally:
- Over $10 million, and
- Used for financing purchases of U.S. capital equipment and services, and exports to large-scale projects.
- Fixed rate

## Project/Structured Finance

- 	Project or “limited recourse project financing” means debt repayment comes solely from project cash flow, i.e., future project revenues.
- 	Even with Ex-Im Bank support, lenders need:
- Strong off-take contracts
- Technical comfort that project will be fully funded, constructed on time, and operated efficiently
- Reliable / creditworthy parties: sponsors, constructors, operator, and output purchasers
- Appropriate risk-sharing among project parties

## Project Finance Structure

**Input**
**Contracts**
**Guaranteed supply of inputs to project**

**SPV**
**Made up of project sponsors that provide  equity.  SPV is the borrower. **

**Off Taker**
**Provides revenue stream to project.  Must be creditworthy.**

**EPC**
**Likely source of U.S. content.  Must show technical experience.**

**O&M**
**Contract with capable firm extends beyond repayment term.**

**Host Government**
**Legal /regulatory framework & evident support**

## Differences between Structured & Project Finance

_**Structured (Typical)**_
**Existing company borrower financing an expansion**
**Full recourse to borrower**
**Analyze historical and projected future cash**
**Limited “perfection of security”**
**Can finance 85% of project cost (subject to U.S. content)**

_**Project Finance**_
**SPV borrower financing green-field project or expansion**
**Limited recourse to parent companies**
**Analyze project’s future cash flows**
**Complex documentation to perfect security**
**More than 15% equity required, so total debt provided less than 85%**

## Transportation/Aircraft

- Asset Based financing for aircraft
- Ex-Im Bank takes a lien on aircraft
- Exposure fee assessed on each transaction
- Lower exposure fees in countries that sign, ratify and implement the Cape Town Convention

## Our special initiatives allow for enhancements

- Ex-Im Bank will provide additional enhancements for certain types of transactions
- Environmental
- Medical
- Transportation Safety
- Enhancements Include
- Capitalized interest during construction
- Extended maximum allowable repayment terms (7 years, Medium-Term; 15 years Long-Term)

**Notes:**
Environmental exports are  favored transactions at Eximbank.  As you can see, in addition to the normal program features, there is automatic availability of local cost cover, capitalization of interest during the construction period, and the OECD maximum allowable country repayment term.

Qualifying exports include those that aid in the abatement, mitigation, control or prevention of air, water, and ground contamination or pollution, or which provide protection in the handling of toxic substances.  The following are examples of types of products considered eligible:  instruments to measure or monitor water quality, emission or effluent pollution control equipment, waste disposal systems, services to upgrade environmental regulations, environmental or ecological engineering, training, or monitoring equipment, toxic material handling devices, water purification devices, energy efficiency enhancements.
Projects considered eligible include: Air or water cleanup, ecology management, renewable or alternative energy such as photovoltaic, wind, hybrid, biomass, fuel cells, waste-to-energy, hydroelectric (<1GW), coal gasification, and geothermal; Environmental upgrades; Wastewater, sewage, toxic waste, waste treatment projects or cleanup.

## Ex-Im Bank has several main policies

- Shipping (Only for All Direct Loans and Guarantees over $20 million)
- Foreign content
- Local Costs
- Ex-Im Bank can support up to 30% of the US contract value in costs incurred in the buyer’s country
- Military
- Ex-Im Bank cannot consider Military exports

## Ex-Im Bank’s due diligence is both qualitative and quantitative

**   ****Ex-Im Bank’s comprehensive assessment evaluates both financial and non-financial aspects of the transaction  **
- “Know Your Customer” principles
- Corporate governance issues
- Management capacity and track record
- Financial adequacy
-  cash-flows; debt serviceability
- Transaction sensibility – “Want vs. Need”

## Application Processing has Several Steps

-  Application review
-  Loan officer/Insurance underwriter review
-  Engineering review
-  Approval - Loan Committee or Board
-  Legal review - documentation and closing
-  Credit Administration - disbursement

**Notes:**
When an application is received by Eximbank, it is logged in and routed to the Business Development division for review.  For LI’s the LI is issued and the process is terminated.  For final commitments and PC’s, the application is reviewed for completeness and routed to the loan division.  Within the loan division the credit review is conducted, a simultaneous engineering review is conducted, and the application is presented to the appropriated reviewing body for final approval.  Transactions under xxxx, with no policy implications can be approved by the Loan Committee; larger transactions must be approved by the Board.   Transactions above $30mm and s/t transactions above $50mm must then be routed to the National Advisory Council for review.  NAC members are EXIM, Treasury, State Dept, USTR, Dept of Commerce, AID, and the Federal Reserve Board; TDA advises on tied aid transactions.  NAC has seven days to comment; in practice, the members are frequently polled the same day.  Transactions above $100mm and all nuclear cases are routed to Congress (Speaker of the House and President of the Senate) for review.  The maximum time period allowed in Congress varies between 25 and 35 days according to whether a recess is in process.  Congress has never stopped an Exim transaction. After approval the transaction is routed to the Legal division for documentation and loan closing, and then routed to Credit Administration for disbursement

## Strategic Initiatives, Africa

- Benjamin Todd, Business Development Officer – Africa
- Email:  _[ben.todd@exim.gov](mailto:ben.todd@exim.gov)_
- Tel: 202-565-3916
- Fax: 202-565-3839

## Back-Up Slides

## Success Stories:  Working Capital

- 	Ex-Im authorized a Multi-Buyer Working Capital Loan Guarantee for Kazar International of San Francisco for $877,500.  This authorization allows Kazar International to facilitate its machinery and equipment export operations to many countries, including **Senegal** and **Mauritania**.

## Success Stories: Short-Term

- 	Valley Grain, Inc. DBA Kapa Seed Service of Quincy, Washington sold seed valued at $99,000 to its customer, Gellman Seeds of **South Africa** using an Ex-Im Bank ST Multi-buyer comprehensive policy.

## Success Stories: Medium-Term

- 	Jacaranda Plant and Machinery Hire Company of **Zambia** imported an STX 480 horsepower tractor supplied by CNH America LLC of Racine, Wisconsin.  Ex-Im Bank guaranteed the $285,332 transaction through its Medium-Term Loan Guarantee product.

## Ghana Success Stories:  Long-Term Loan

**WELDY-LAMOT ASSOCIATES INC. WINS $350 MILLION RURAL ELECTRIFICATION TURNKEY CONTRACT FROM THE GOVERNMENT OF GHANA**
- $350 million rural electrification turnkey contract from the government of Ghana, and will procure equipment and services from U.S. suppliers around the country to fill the order backed by a $344 million loan from Ex-Im Bank.
- An estimated 45 percent of the contract price will go to small businesses.
- The government of Ghana sees the ongoing program to bring electrical connectivity to the populace of Ghana as the underpinning for the country's economic growth and poverty reduction. The goal is to connect all eligible communities with a minimum population of 500 individuals, or approximately 3,800 villages, to the national grid by 2020.

## Project Finance Success Story:  Nigeria LNG

- Ex-Im Bank provided a $135 million comprehensive guarantee allowing Nigeria LNG Ltd to purchase US-made equipment needed as part of a $1.9 billion expansion of its liquid natural gas production.
- The transaction is a blend of project finance risk and corporate credit risk offered on a repayment term of 8.5 years
- The expansion of Nigeria LNG's production capacity will produce economic and environmental benefits to Nigeria, as well as, US jobs.
- This expansion will help Nigeria meet its stated objective to reduce the open burning (gas flaring) of natural gas.
- Kellogg Brown and Root, a Houston, Texas international engineering and construction company is the US exporter for this transaction. Citibank N.A., London is the guaranteed lender.
- Four export credit agencies (ECA) and one development bank are participating in financing Nigeria LNG's production expansion project called NLNGPlus. The ECA lenders (Ex-Im Bank, SACE, NCM and ECGD) and the Africa Development Bank are providing $720 million of the $1.1 billion in financing raised for this project.

## 14 Nigerian Banks in $1 billion Nigerian Banking Facility

| Access Bank   | www.accessbankplc.com   |
| --- | --- |
| Afribank  | www.afribank.com   |
| Diamond Bank  | www.diamondbank.com   |
| Ecobank  | www.ecobank.com   |
| Fidelity Bank  | www.fidelitybankplc.com   |
| First Bank  | www.firstbanknigeria.com   |
| First City Monument  | www.firstcitygroup.com   |
| Guaranty Trust Bank (GTB)  | www.gtbplc.com   |
| Investment Banking & Trust Company (IBTC)  | www.ibtc.com   |
| Intercontinental Bank  | www.intercontinentalbankplc.com   |
| Oceanic Bank  | www.oceanicbanknigeria.com   |
| Skye Bank  | www.skyebanking.com   |
| Union Bank  | www.unionbankng.com   |
| Zenith Bank  | www.zenithbank.com   |

## SSA Country Exposure, leading countries

| Country | Amount ($M) | Leading Export |
| --- | --- | --- |
| Angola | $295 | Aircraft |
| Côte d’Ivoire | $152 | Rescheduled Loans |
| Democratic Republic of Congo | $192 | Rescheduled Loans |
| Ethiopia | $231 | Aircraft |
| Ghana | $563 | Oil and Gas; Electricity Transmission |
| Kenya | $431 | Aircraft |
| Nigeria | $412 | Oil and Gas; Aircraft |
| South Africa | $112 | Aircraft |