Finance Lease Guarantee

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• Finance Lease Guarantee
• Dario J. Avello
• Business Development Officer
• Export-Import Bank of the U.S.
• Dario.Avello_at_exim.gov

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• Export-Import Bank of the United States?

• Ex-Im Bank
• An independent agency of the U.S. Government
• Established in 1934
• Headquartered in Washington, D.C.
• 5 regional offices and 2 satellite offices
• Mission
• To Support U.S. Exports
• To Create and/or Sustain U.S. Jobs

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Ex-Im Banks Main Credit Products

• S/T export credit insurance
• S/T pre-export guarantees (Working Capital)
• M/T guarantees/insurance (lt10m, lt7yrs)
• L/T loans and guarantees (gt10m, or gt7yrs)
• Project finance/structured finance
• Foreign Dealer Finance Insurance (Floor Plans)
• Finance Lease Guarantee
• Finance Lease Insurance
• Operating Lease Insurance

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Total Authorizations in Billions
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Just a few restrictions

• Military Exports (exceptions apply)
• Foreign Content
• Restricted Countries (political or economic)
• Economic Impact
• Shipping
• Creditworthiness and Additionality
• Environmental

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Military Restrictions

• No Defense Articles or Services
• Three Exceptions
• Humanitarian purposes
• Drug interdiction
• Dual use items

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Finance Lease Guarantee Parameters

• Guarantee available only on finance lease
• Up to 10 million amount
• 100 political and commercial risk cover
• Lessor must be financial institution, affiliate,
  or an experienced leasing company
• Acceptable structures
• US Lessor ? foreign lessee cross border lease
• Foreign Lessor ? for. lessee local lease
• Foreign Lessor ? 3rd country lessee
  international lease

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Finance Lease Guarantee Parameters (Contd.)

• Net leases (maintenance costs for lessee)
• 15 cash D.P. required (Lessor may finance it for
  lessee)
• Exporter Certificate req. by Lessor (x-border
  lease) or by Supplier (local and international
  leases)
• Level amortizations (equal principal) OK
• Level Rents (equal payments) OK

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Finance Lease Guarantee Parameters (Contd.)

• Title to leased asset remains w/Lessor
• Residual values are allowed
• At each Rental Pmt Date there is a Termination
  Value (used for claims)
• Local costs and ancillary services are OK,
  subject to prior approval
• Lessors Lease Agreement needs prior approval and
  3rd party legal opinion

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Apply for Guarantee Step One

• Do the following
• 1.- Ask Ex-Im for a MGA-FL by completing
  Application for a Master Guarantee
  AgreementFinance Lease (Medium-Term
  CreditsElectronic Compliance Program) aka
  Appendix 10-f
• 2.- Submit your data
• Find the application for the MGA at
• www.exim.gov/pub/pdf/ebd-l-02.pdf

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Apply for Guarantee Step Two

• Then
• READ the MGAFL, which is the legal framework of
  our relationship with the Lessor (or do this as
  Step One!)
• The text of the guarantee can be found at the
  following link
• www.exim.gov/pub/pdf/mga-mfl.pdf

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Lessee Credit Qualification

• See M/T Credit Standards
• ?www.exim.gov/pub/pdf/ebd-m-39.pdf
• Missed credit standards may have mitigating
  circumstances, or lessor may have outside
  guarantees or collateral so, applicant for
  guarantee must MAKE THE CASE in the application
• Lessor title to asset is not a singular
  mitigation for low credit quality of Lessee

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Lessee Credit Application

• Originate
• A term sheet for a credit-worthy Lessee, then
  apply to Ex-Im using Application for Medium-Term
  Insurance or Guarantee, and check the box for the
  Finance Lease Guarantee
• Find the application for the Lessee Credit at
• www.exim.gov/pub/pdf/eib-03-02.pdf
• Follow the instructions of and submit the
  Exhibits, Schedules, and Annexes of the
  application.

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What does it cost before the deal?

• Pre-contract Letters of Interest from Ex-Im
  Cost 100 _at_ available online are non-binding
  but outline the full structure and are useful in
  marketing to the prospective Lessee
• Guarantee commitment fee 1/8 p.a., begins to
  accrue 60 days from Guarantee Approval Date (aka
  Credit Approval Date), is calculated to Lease
  Delivery Date, and it is payable 45 days after
  accrual has begun, whether or not
  Credit/Guarantee has become operable

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What does it cost upon success?

• Exposure Fee determined by the country of risk,
  type of Lessee (sovereign, private-sector, or
  bank-guaranteed), term of lease, delivery period,
  buyer risk, and fee financing.
• Examples, private Lessee (typical risk)
• Mexico/Chile 5 years 1.77 flat
• Costa Rica 5 years 2.89 flat
• Brazil 5 years 4.32 flat
• Peru 5 years 4.73 flat
• Dom Rep 5 years 6.15 flat

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How to Claim on the Guarantee

• Lessee is past due if he has not paid after 30
  days from a scheduled installment of Guaranteed
  Rents (rents may be payable monthly, quarterly or
  semi-annually)
• Lessor makes formal demand of payment on lessee
  at that time
• 15 days later, Lessor may claim/demand payment
  from Ex-Im Bank
• Lessor will utilize Schedule D to assign all
  rights, title, and interest in the Lease
  Supplement (the remaining rents due on the Lease,
  and the amount claimed) to Ex-Im Bank

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Finance Lease guarantee added features

• Ex-Im Banks Loan and Lease guarantees are
  available to cover obligations denominated in 22
  foreign currencies. Foreign Currency Guarantees
  have stipulated conversion dates, e.g., when a
  claim is paid in a foreign currency, the
  remaining obligation of the Lessee is converted
  to US
• See Foreign Currency Supplements
• www.exim.gov/pub/pdf/suppl-fcs/pdf, and
• www.exim.gov/pub/pdf/annex-fcs.pdf

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For further Assistance and Information

• Please contact
• Darío J. AvelloBusiness Development Officer
• Southeast Regional Office5835 Blue Lagoon Drive,
  Ste 203Miami, Florida 33126 USA
• [phone] Ext. 19
• Dario.Avello_at_exim.gov
• www.exim.gov