medium and long term export finance - feb · 2/10/2014 · finance amount: 100% of the contract...

Medium and Long Term

Export Finance

Kristof Luycx

2 October 2014

ING International Business Day

Agenda

Introduction and Market View

Export Finance at a glance

Belgian Export Finance

Delcredere | Ducroire (formerly ONDD)

FINEXPO

The world according to ING

Financing Structures

Supplier’s Credit

Buyer’s Credit

Key advantages

Q&A

Medium and Long Term Export Finance

Introduction

Belgium:

Open economy in the heart of Europe: export of goods and services amount to 86% of GDP. Belgium

ranks 12th as exporter and 13th as importer globally of world merchandise (WTO 2013).

In 2013 Belgian export increased by 1,8%, compared to 2% growth in 2012 after a 10% recovery in

2011.

European Exports: best performances in Malta, Ireland and Eastern Europe

Intercontinental Exports:

Africa increased with 13% in 2013 after an increase in 2012 of 25%, mainly thanks to Ghana,

Nigeria and Cameroon

Asia decreased by 0.1% in 2013 after 3% increase in 2012, best performances in UAE, Vietnam

and Malaysia

General picture in the EU:

EU remains largest trade partner of Belgium: 70% of export to European Countries

As many developing countries (“emerging markets”) seem less impacted by the financial crisis,

exporting to emerging markets has become even more important

But … exports to emerging markets comes with additional (higher) risks and requirements

Export Finance can be the tool for you to conquer new clients outside the “normal” markets

Sources: www.wto.org and www.abh-ace.be


Market view

http://www.wto.org/

http://www.abh-ace.be/

ING definition:

“Medium to long term financing of export related transactions for which transfer and credit risks are largely

mitigated through ECA and/or PRI cover”

OECD definition:

“An export credit arises when a foreign buyer of exported goods or services is allowed to defer payment,

with backing from an Export Credit Agency (“ECA”)”

The distinction between Export Finance and Trade Finance is mainly a combination of:

tenor (short term vs. long term)

underlying goods (capital goods & construction works)

quality & country of buyer

But the sharp difference is fading out, especially since the financial crisis started end of 2008.


Definition

Belgian ECA system

- Delcredere | Ducroire (formerly ONDD)

- Finexpo

Supporting entities

- Belgian Foreign Trade Agency > www.abh-ace.be

- AWEX (Agence wallone à l’Exportation & aux Investissements étrangers) > www.awex.be

- BIE ( Brussels Invest & Export) > www.brusselsinvestexport.be

- FIT (Flanders Investment & Trade) > www.flanderstrade.be

- FOD Buitenlandse Zaken, Buitenlandse Handel en Ontwikkelingssamenwerking >

www.diplomatie.belgium.be

And of course the ICC Belgium and the Federation of Belgian Chambers of Commerce


Belgian Export Finance

http://www.abh-ace.be/

http://www.awex.be/

http://www.brusselsinvestexport.be/

http://www.flanderstrade.be/

http://www.diplomatie.belgium.be/

Office Nationale du Ducroire / Nationale Delcredredienst (“ONDD”) is the official Belgian Export Credit

Agency (“ECA”). On 19 November 2013, ONDD changed into Delcredere | Ducroire (“Delcredere”),

ONDD was established by the Belgian government in 1935 as an autonomous public institution

working under an explicit Belgian State Guarantee

Delcredere’s mission is to support Belgian international economic relations by covering risks relating to

exports, imports and foreign investments

Delcredere is part of Credendo Group

Product offering:

ECA Window (core business / traditional activity)

Credit insurance (export, import, investment)

Direct Financing: Forfaiting (one stop shop for amounts < EUR 5 mln)

Financial guarantees (facilities for Belgian companies)

Market Window (side business)

Unfunded risk participations with banks

Participations in LC confirmations with banks

For more information: www.delcredereducroire.be


ONDD

http://www.delcredereducroire.be/

http://www.ondd.be/webondd/Website.nsf

http://www.ondd.be/webondd/Website.nsf

Finexpo was established by Royal Decree in 1997 and is part of the Belgian government (Ministry of

Foreign Affairs, Foreign Trade and Development Cooperation)

The name Finexpo is a combination of the words “Finance” and “Exports”

Finexpo’s Mission: “to support Belgian exporters of capital goods by reducing or stabilizing the

financing costs of credits”

Finexpo is organised as an Advise Committee with representatives from different federal and regional

ministries and Delcredere. The Committee’s proposals are decided by the competent Ministry

Finexpo’s instruments:

Commercial financing

Interest stabilisation (“CIRR” – Commercial Interest Reference Rate)

Concessional financing (development aid)*

Interest bonification

Interest bonification with a grant

Grant

State to State loan (Tied or Untied) / mixed credit

*Applicable for export of capital goods to developing countries, non commercial viable projects, relevant for development.


Finexpo


LisbonMadrid

DublinKiev

Istanbul

Milan

LondonAmsterdam

Paris

FrankfurtBrussels

Luxembourg

Vienna BudapestBratislava

Geneva Bucharest

Prague

Sofia

Warsaw

Ankara

Izmir

Zurich

St Petersburg

Moscow

Commercial Banking

Alliance Banking

CB + Int. Business Clients office

CB office

Disclaimer: ING Bank does not have a commercial banking license in the U.S. and therefore is not permitted to conduct commercial banking business in the U.S. Through its wholly owned subsidiary

ING Financial Holdings Corporation, and its affiliates, it offers a full array of wholesale products such as commercial lending, corporate finance and a full range of FM products and services.

KatowiceBrno

The world according to ING Commercial Banking…

Moscow

Mumbai

Bangalore

Hong Kong

Shanghai

Buenos Aires

Sao Paulo

Mexico City

New York

AtlantaDallas

Houston

Los Angeles Beijing

Jakarta

Tokyo

Almaty

Kuala Lumpur

Labuan

Ulan Bator

Manila

Singapore

Seoul

Taipei

Bangkok

DubaiHanoi

St Petersburg

Sydney

BahrainPune

Delhi

Kolkata

Chennai

Hyderabad

A knowledgeable global network of over 30 specialists in various locations

New YorkT. Golfinos

TokyoI. Tokiwa

SeoulJ. Kim

AmsterdamR. Hansen

FrankfurtM. de Vries

Prague P. Fojtl

BeijingS. Ye

Europe Americas Asia

Structured Export FinanceEric de Jonge

Lending ServicesChristopher Steane

International Trade

& Export FinancePaul Dekker


BrusselsF. Masschelein

http://www.cesce.es/

http://www.cesce.es/

http://global.atradius.com/

http://global.atradius.com/

http://www.ekf.dk/

http://www.ekf.dk/

http://www.giek.no/

http://www.giek.no/

http://www.finnvera.fi/

http://www.finnvera.fi/

http://www.ecgd.gov.uk/

http://www.ecgd.gov.uk/


Deal Team in Brussels for Delcredere | Ducroire covered deals

Responsible for originating and arranging export transactions in Belgium being one of ING’s core

home markets.

A dedicated and experienced team of 3 professionals in Brussels is responsible for local follow up of

Belgian export transactions.

Long-standing relationships with Belgian exporters and full-fledged range of financial products offered

in the Belgian market.

Besides ECA responsibility, SEF also has responsibility for other risk mitigated financing structures,

e.g. Multilateral, PRI, etc.

Close cooperation with the Sector Based structured finance teams (a.o. Infrastructure, Metals and

Mining, Natural Resources, Off-shore and Power & Utilities) and with the Amsterdam Team (in depth

expertise in the ECA products and services).

Existing Belgian track record with selected transactions.

Infrastructure

Russia 10/11

ZAO Tamanneftegaz

EUR 21m

ONDD Covered Export CreditFacility

Sole Mandated Lead Arranger & LenderCement Industry

Thailand 01/13

Joint MLA and Hermes/ONDD Agent

TPI Polene pcl

EUR 154m

Euler Hermes and ONDD

Covered Export Credit Facilities

http://cdn.picbadges.com/pb/204624/badge.png

http://cdn.picbadges.com/pb/204624/badge.png

Assist suppliers and buyers in arranging medium- to long-term financing for substantial capital equipment

purchases and/or construction works and services

Arrange financing for clients with limited access to credit and capital markets

Mitigate the political and/or commercial risk related to doing business in emerging markets

Advise clients on availability and appropriate structure of export credit agency coverage and other forms

of credit enhancement for exports to, and investments in, higher-risk country markets

Use guarantees, insurance and direct funding from export credit, foreign investment, and other bilateral

and multilateral development agencies, as well as private insurers


What we do

The most common Export Finance structures:

Supplier’s Credit

Buyer’s Credit


Financing Structures

Characteristics of the transaction:

Exporter: Textiles Machinery BVBA

Importer: Turk Tekstil, Istanbul/Turkey

Guarantor: Yapi Kredi Bankasi AS, Ankara/Turkey

Discounting Bank: ING Belgium SA/NV

Finance structure: supplier’s credit, financed by way of discounting bills of exchange /

promissory notes

Documentation: discounting agreement between Exporter and Discounting Bank

Contract amount: EUR 5,000,000

Payment terms: 15% advance payment; 85% payment via avalised bills of exchange

Delivery period: 6 months

Repayment period: 5 years, in 10 equal semi-annual instalments the 1st maturing 6

months after delivery


Supplier’s Credit

Payment Guarantee

(“aval”)

Lender /

Discounting Bank

Exporter

(Supplier)

ECA

GUARANTOR

1) Supply contract

2a) ECA Cover

2b

) EC

A C

ov

er

3a) Deliveries of goods & services

5) Repayment

Importer

(Buyer)

Advance payment &

bills of exchange (B/E’s


Supplier’s Credit – sample structure

Supplier’s credit: you provide the extended payment term to your client, and have to

price that….

The bank concludes documentation with the exporter, via a Discounting Agreement,

when buying the receivables

Thereafter the bank collects the payment from the importer, but discounting may also be

“silent”

Discounting or forfaiting of your receivables can be with / without recourse

Supplier’s credit is especially practical for small contract amounts and/or short delivery

period, implying “light” documentation

Pricing of a supplier’s credit (ECA premium, bank costs, exporter pre-financing costs) is

to be included in your contract price and/or the interest rate you charge the importer

Your risk is that the payment documents (bills of exchange) are invalid, not accepted

This structure as such does not give you working capital, you have to pre-finance your

own production


Supplier’s Credit – Characteristics

Characteristics of the transaction

Exporter: Global Dredging SA

Importer/Borrower: Ministry of Transport of Ghana

Guarantor: Ministry of Finance of Ghana

Structure: buyer’s credit

Lender: ING Bank NV

Documentation: loan agreement between the Lender and the Borrower

Contract amount: EUR 50,000,000

Payment terms: 20% advance payment; 80% via disbursement under a buyer’s credit

Finance amount: 100% of the contract amount + 100% of the ONDD premium + 100% of IDC

Works/Construction period: 2 years

Repayment period: 10 years, in 20 equal semi-annual instalments the 1st maturing 6 months

after completion of the works


Buyer’s Credit

2b) Payment

Guarantee

Lender

Exporter

(Supplier)

ECA

GUARANTOR1) Supply contract

2a) Credit agreement

3a) ECA Cover

Importer (Buyer)

Borrower

3b

) EC

A C

ov

er

5a) Deliveries of equipment

6) Repayment

4b) 20% advance payment bond

4a) 20% advance payment


Buyer’s Credit – Sample structure

Buyer’s credit: the financing bank provides your client with the financing to pay your

delivery

The bank concludes documentation with your client, you as exporter have access to the

financing upon pre agreed documents and milestones

This structure potentially provides you with working capital to financing your production

process

The disadvantage is that the buyer’s credit is a rather “expensive” financing structure

and perceived cumbersome due to heavy documentation

The buyer’s credit therefore is not the best solution for smaller contracts or with “difficult”

risks/counterparts

Pricing of a buyer’s credit (ECA premium, bank costs) is passed on to your client, ensure

that this is not “forgotten” in the process

Also include your own financing costs and ONDD premium for the exporter’s policy (for

construction and guarantee cover) in your contract


Buyer’s Credit – Characteristics

Manufacturing and

drawdown period

Repayment period

DeliverySigning of

contract

Supplier’s credit

Manufacturing and

drawdown period

Repayment period

Buyer’s credit

DeliverySigning of

contract


Buyer’s vs. Supplier’s Credit – Financing Profile

Main advantages of Export Finance

Export Finance supports exporters by providing financing to

complement your commercial contract

With Export Finance you can enter new markets and

compete on equal / better terms than your competitors

ECA Loans have attractive financing terms and offer longer

tenor/maturity than otherwise available in the commercial

bank loan market

Mitigate commercial & political risks for those projects which

would otherwise not be bankable

Usually the financed equipment is not required as collateral

for the ECA/ECA Lender

Export Finance can be enhanced with CIRR rates and/or

government backed funding, in the current market

environment making this an even more attractive financing

proposal

For smaller sized supplier credits, Delcredere | Ducroire can

provide one stop shop at attractive terms

The financing package can be a decisive factor in winning

the deal

Main strengths of ING’s Structured Export Finance

Global Network including 30 professionals in 7 locations

worldwide (Brussels, Amsterdam, New York, Beijing, Seoul,

Tokyo, Prague and Frankfurt)

Strong co-operation with Sector-Based Structured Finance

Teams (including Telecom, Natural Resources, Asset-

Based Finance and Power & Utilities)

Excellent coverage of main ECAs, Multilateral Agencies

(MLA), Private Risk Insurers (PRI) and major capital goods

exporters in key OECD export countries

Active player in the Structured Export Finance business

worldwide with a proven track record in arranging and

syndicating (multi-sourced) Export & Project and Asset-

Based finance transactions

Local presence in the importer’s country to provide local

contacts/leverage local relationships and evaluate country

risks

Broadly based technical expertise in order to combine a

number of financing products into a complete solution

Proven track record and experience in executing deals

successfully


Key advantages

http://www.giek.no/giek_en/default.asp





Contact Details

Local Structured Finance Belux

Kristof Luycx

Senior Project & Export Finance Manager

T: +32 2 547 3893

E: [email protected]

Thibaut Morel

Project & Export Finance Manager

T: +32 2 547 6902


Structured Export Finance Amsterdam

Eugène Kock

Director

T: +31 20 563 5517


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Structured Export Finance

Disclaimer

Thanks for your attention

Structured Export Finance

medium and long term export finance - feb · 2/10/2014 · finance amount: 100% of the contract...

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