london forfaiting - international trade club

Ian Lucas

Head of UK Marketing

Agenda

LFC & FIMBank

Forfaiting Opportunities

Country Lists

What is Forfaiting?How does it work?DocumentationProductsAdvantagesMethod

Forfaiting

What is Forfaiting?

Basics of Forfaiting

Forfaiting is the discounting of international trade receivables on a

“Without Recourse” basis

A form of supplier credit

What is Forfaiting?

There are no official statistics on the actual size of the Forfaiting Market

However, is has been estimated that volumes could be as high as:

US$30 billion of new business per annum; and

US$60-75 billion outstanding at anyone time

Forfaiting Market

6. Exporter delivers documents to the Forfaiter1. Forfaiter commits to purchase deal from the Exporter

1.Forfaiter commits to purchase deal from the Exporter

Commercial contract between Exporter and Importer

2.

2. Commercial contract between Exporter and Importer

3.

Delivery of goods from Exporter to Importer

3. Delivery of goods from Exporter to Importer

4.Bank gives guarantee

4. Bank gives guarantee

5.

Importer hands over documents to Exporter

5. Importer hands over documents to Exporter

6.Exporter delivers documents to the Forfaiter7.

Forfaiter pays cash ‘without recourse’to the Exporter

7. Forfaiter pays cash ‘without recourse’ to the Exporter

8.

Forfaiter presents documents to Bank at maturity for payment

8. Forfaiter presents documents to Bank at maturity for payment

9.

Importer repays Bank at maturity

9. Importer repays Bank at maturity

10.Bank repays Forfaiter at maturity

10. Bank repays Forfaiter at maturity

How does Forfaiting Work?

Pricing ComponentsDiscount Rate (Interest Rate)► Credit Rating – Country/Guarantor► Availability (Country & Bank Limits)► Cost of Funding

Commitment FeeOther Fees/Grace Days

How does Forfaiting Work?

Acceptance of Bill of Exchange by Importer/Buyer

Issuance of Promissory Note by Importer/Buyer

Letter of Credit

Book Receivables

Lease Receivables

NEGOTIABLE INSTRUMENTS

Documentation

Building Projects

(Hotels, Hospitals etc.)

Trucks

Machinery

Construction Equipment

Commodities

(Oil, Grain etc.)Soccer Players

Products financed by Forfaiting

Transaction Characteristics

Tenors 1 month to 10 years Amounts US$100,000 to US$200 millionAll major currencies No recourse to exporter / endorserFixed rateOften guaranteed for payment on maturity by a foreign bank (Importer’s Bank) or Sovereign

Advantages of Forfaiting

Finances 100% of the contract valueEnables Exporter to offer credit termsSale is made on a without recourse basisFinancing is off balance sheetSimple DocumentationQuick DecisionsImproves Cash FlowServices, Foreign and Local works can be financedNo restriction on country sourcing

Forfaiting: Working Together

Exporter identifies potential project to be financed by LFCLFC advises alternative solutions/structures for financing Exporter/LFC work together to achieve best financing solution for Exporter/BuyerExporter concludes sales contract with buyerSimultaneously Exporter concludes financing contract with LFCExporter delivers goodsSimultaneously LFC pays cash without recourse to Exporter

About LFC & FIMBank

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2009

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Ian Lucas

Head of UK Marketing

London Forfaiting Company Ltd

6. Exporter delivers documents to the Forfaiter1. Forfaiter commits to purchase deal from the Exporter

1.

2.

2. Commercial contract between Exporter and Importer

3.

3. Delivery of goods from Exporter to Importer

4.

4. Bank gives guarantee

5.

5. Importer hands over documents to Exporter

6. 7.

7. Forfaiter pays cash ‘without recourse’ to the Exporter

8.

8. Forfaiter presents documents to Bank at maturity for payment

9.

9. Importer repays Bank at maturity

10.

10. Bank repays Forfaiter at maturity

How does Forfaiting Work?