Title: Financing Air
1Financing Air Waste Management Technology
Exports
- Craig OConnor
- Environmental Liaison Officer
2U.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.
3Environmental 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.
4Ex-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
5Export 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.
6Case 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.
7Short-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.
8Medium-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.
9Medium-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.
10Case 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.
11Loan 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
12Case 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.
13What 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.
14What 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.
15New 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.
16Working 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.
17Case 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.
18Conclusion
- 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