Financing Air

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Financing Air Waste Management Technology
Exports

• Craig OConnor
• Environmental Liaison Officer

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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.

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Environmental Exports Program

• Support for environmentally-beneficial exports
  mandated in Ex-Im Banks 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.

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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

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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.

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Case Study Kimre, Inc

• Kimre, Inc. a maker of air pollution control
  filters uses Ex-Im Banks 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/Cs, enables customers to offer
  credit to their customers.
• According Kimres Controller Ms. Elizabeth Mosca,
  
• Ex-Im Banks Insurance has provided us with the
  ability to offer open account credit instead of
  L/Cs 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.

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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 Banks Loan Officer analyzes the
  application and makes a decision on the amount of
  credit to be supported.

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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.

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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 years financial
  statement is older than 1 year.
• Note audited statements required for credits
  over 1MM
• 3. Ex-Im Banks Loan Officer analyzes the
  application and makes a decision on the amount of
  credit to be supported.

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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.).
• Received the maximum allowable OECD repayment
  term of 7-years under Ex-Im Banks 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.As expansion
  into tire recycling.

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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

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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 Chinas State Environmental
  Protection Agency.

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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 borrowers 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.

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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 sponsors 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 
• 1.   Special purpose accounts, including
  offshore payment accounts, escrow or reserve
  accounts, or other accounts that would be subject
  to Ex-Im Banks 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.

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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 Poors, Moodys, 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.

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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 for
  a list) without prior Ex-Im Bank approval.

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Case Study Taiwan Air Pollution Control

• Ex-Im Banks WCGP made a number of working
  capital loans to Anguil Environmental to support
  its export sales.
• Ex-Im Banks 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 Banks WCGP critical in this case given
  that Anguil is a small business with limited
  resources, and the source of repayment an
  overseas contract.

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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 Banks 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
• Craig.oconnor_at_exim.gov