Medium and Long Term Export Finance

Transcription

1 Medium and Long Term Export Finance Kristof Luycx 2 October 2014 ING International Business Day

2 Introduction 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

3 Market view Belgium: Open economy in the heart of Europe: export of goods and services amount to 86% of GDP. Belgium ranks 12 th as exporter and 13 th 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 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: and

4 Definition 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.

5 Belgian Export Finance Belgian ECA system - Delcredere Ducroire (formerly ONDD) - Finexpo Supporting entities - Belgian Foreign Trade Agency > - AWEX (Agence wallone à l Exportation & aux Investissements étrangers) > - BIE ( Brussels Invest & Export) > - FIT (Flanders Investment & Trade) > - FOD Buitenlandse Zaken, Buitenlandse Handel en Ontwikkelingssamenwerking > And of course the ICC Belgium and the Federation of Belgian Chambers of Commerce

6 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: Medium and Long Term Export Finance ONDD 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:

7 Finexpo 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.

8 The world according to ING Commercial Banking St Petersburg Moscow London Amsterdam Warsaw Dublin Frankfurt Prague Brussels Katowice Brno Luxembourg Zurich Bratislava Paris Vienna Budapest Geneva Milan Bucharest St Petersburg Moscow Kiev Los Angeles Mexico City Dallas Houston Atlanta New York Dubai Bahrain Almaty Pune Mumbai Bangalore Delhi Kolkata Ulan Bator Beijing Shanghai Taipei Hanoi Hong Kong Bangkok Manila Hyderabad Chennai Labuan Kuala Lumpur Singapore Jakarta Seoul Tokyo Lisbon Madrid Sofia Istanbul Izmir Ankara Sao Paulo Buenos Aires Sydney 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.

9 A knowledgeable global network of over 30 specialists in various locations Lending Services Christopher Steane International Trade & Export Finance Paul Dekker Structured Export Finance Eric de Jonge Europe Americas Asia Brussels F. Masschelein Amsterdam R. Hansen Frankfurt M. de Vries Prague P. Fojtl New York T. Golfinos Tokyo I. Tokiwa Seoul J. Kim Beijing S. Ye

10 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. Thailand 01/13 TPI Polene pcl EUR 154m Euler Hermes and ONDD Covered Export Credit Facilities Russia 10/11 ZAO Tamanneftegaz EUR 21m ONDD Covered Export Credit Facility Joint MLA and Hermes/ONDD Agent Cement Industry Sole Mandated Lead Arranger & Lender Infrastructure

11 What we do 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

12 Financing Structures The most common Export Finance structures: Supplier s Credit Buyer s Credit

13 Supplier s Credit 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

14 Supplier s Credit sample structure 1) Supply contract Exporter (Supplier) Advance payment & bills of exchange (B/E s 3a) Deliveries of goods & services Importer (Buyer) GUARANTOR 2b) ECA Cover 5) Repayment Payment Guarantee ( aval ) ECA 2a) ECA Cover Lender / Discounting Bank

15 Supplier s Credit Characteristics 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

16 Buyer s Credit 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

17 Buyer s Credit Sample structure 4b) 20% advance payment bond Exporter (Supplier) 4a) 20% advance payment 1) Supply contract 5a) Deliveries of equipment Importer (Buyer) Borrower GUARANTOR 3b) ECA Cover 6) Repayment 2b) Payment Guarantee 2a) Credit agreement ECA 3a) ECA Cover Lender

18 Buyer s Credit Characteristics 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

19 Buyer s vs. Supplier s Credit Financing Profile Supplier s credit Buyer s credit Manufacturing and drawdown period Repayment period Manufacturing and drawdown period Repayment period Signing of contract Delivery Signing of contract Delivery

20 Key advantages 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

21 Contact Details Local Structured Finance Belux Kristof Luycx Senior Project & Export Finance Manager T: E: kristof.luycx@ingbank.com Structured Export Finance Amsterdam Eugène Kock Director T: E: eugene.kock@ingbank.com Thibaut Morel Project & Export Finance Manager T: E: thibaut.morel@ing.be

22 Structured Export Finance Disclaimer Certain of the statements contained in this release are statements of future expectations and other forward-looking statements. These expectations are based on management s current views and assumptions and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those in such statements due to, among other things, (i) general economic conditions, in particular economic conditions in ING s core markets, (ii) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit markets generally, including changes in borrower and counterparty creditworthiness, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) interest rate levels, (vii) currency exchange rates, (viii) general competitive factors, (ix) changes in laws and regulations, and (x) changes in the policies of governments and/or regulatory authorities. ING assumes no obligation to update any forward-looking information contained in this document. This presentation is intended for general information purposes. It does provide basic information concerning individual Commercial Banking products, insurance products or related services. However none of the information should be interpreted as an offer to sell securities or as investment advice of any kind. Queries concerning these topics should be addressed to the individual business units and/or companies of ING Groep N.V. ('ING Group'). No warranty or representation, express or implied, is given as to the accuracy or completeness of that information. In no event will ING Group, nor any of its directors, employees or advisors accept any liability with regard to the information contained in the individual ING companies', business unit or product group's presentation. ING Group comprises a broad spectrum of companies (the 'ING companies'), many of them operating under their own brand names. Almost every ING company, business unit or product group, has its own website on the internet where it offers information about its products and services. Reference is made to those websites for further details and hyperlinks have been provided from this website to those ING companies, business units and product groups, if available. It is prohibited to modify, copy, distribute, transmit, display, publish, sell, license, create derivative works or use any content for any other purposes than that of this presentation, i.e. providing information about ING Group and its lines of business. No liability While ING Group and ING companies use reasonable efforts to include accurate and up-to-date information in this presentation, errors or omissions sometimes occur. ING Group and ING companies expressly disclaim any liability, whether in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, punitive or special damages arising out of or in any way connected with your access to or use of this presentation, and/or any other ING companies' presentations whether or not ING Group and/or ING companies were aware of the possibility of such damages. All information in this presentation, including but not limited to graphics, text and links to other communication means, is provided 'as is' and is subject to change without prior notice. Such information is provided, to the fullest extent permissible pursuant to applicable law, without warranty of any kind express or implied, including but not limited to implied warranties of merchantability, fitness for a particular purpose, non-infringement from disabling devices. ING Group does not warrant the adequacy, accuracy or completeness of any information in this presentation and expressly disclaim any liability for errors or omissions therein. Users are responsible for evaluating the accuracy, completeness or usefulness of any information or other content available in this presentation.

23 Thanks for your attention Structured Export Finance