ExIm Bank: Trade Financing Solutions

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Ex-Im BankTrade Financing Solutions
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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

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Ex-Im Bank Introduction (contd.)

• 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

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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

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Ex-Im Banks 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

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FY 2008 Ex-Im Bank SSA Data, Dollar Value
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FY 2008 Ex-Im Bank SSA Data, 20 Countries of
Business
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Ex-Im SSA Initiative

• SSA is a priority region, as outlined by Ex-Ims
  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

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How Ex-Im Bank Can Assist You
Your Needs Our Solutions
Pre-export financing
Working Capital Guarantee
Short-Term Accounts Receivable Financing
Export Credit Insurance
Medium-Term Long-Term Financing
Export Credit Insurance or Commercial Loan
Guarantees Project/Structured Finance
Transportation
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Benefits to International Buyers

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

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Each country is open in different sectors and
terms
http//www.exim.gov/tools/country/country_limits.c
fm
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Where is Ex-Im Bank Available in SSA?

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

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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

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Short-Term Export Credit Insurance is Rather
Straightforward
U.S. Supplier
Payment
Goods and Services
InsuranceApplication
Foreign Buyer
EX-IM Bank
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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.

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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

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A Medium/Long-Term Loan Guarantee Involves More
Players
Foreign Buyer
Goods Services
U.S. Supplier
Payment
Loan Repayments
Financial Documentation
Insurance/Loan Guarantee Application
Bank US/ International
Ex-Im Bank
Ex-Im Bank Guarantee
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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

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Medium/Long-Term Foreign Content Policy
U.S. Content
Eligible Foreign Content
Company A
Company B
95
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Ex-Im support available for 60 of contract price
Ex-Im support available for 85 of contract price
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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 _at_ 10 85,000
• Total financed 935,000

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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 gt 150
• Total Liabilities/Total Net Worth lt 175
• Ex-Im Exposure/Total Net Worth lt 40

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Direct Loans are becoming more common

• 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

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

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Project Finance Structure
Host Government Legal /regulatory framework
evident support
Input Contracts Guaranteed supply of inputs to
project
Off Taker Provides revenue stream to project.
Must be creditworthy.
SPV Made up of project sponsors that provide
equity. SPV is the borrower.
OM Contract with capable firm extends beyond
repayment term.
EPC Likely source of U.S. content. Must show
technical experience.
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Differences between Structured Project Finance

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

• 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)

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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

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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)

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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 buyers
  country
• Military
• Ex-Im Bank cannot consider Military exports

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Ex-Im Banks due diligence is both qualitative
and quantitative

• Ex-Im Banks 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

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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

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Strategic Initiatives, Africa

• Benjamin Todd, Business Development Officer
  Africa
• Email ben.todd_at_exim.gov
• Tel [phone]
• Fax [phone]

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Back-Up Slides
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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.

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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.

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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.

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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.

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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.

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14 Nigerian Banks in 1 billion Nigerian Banking
Facility
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SSA Country Exposure, leading countries