ACCESSING UK EXPORT FINANCE SUPPORT - ANIC International Seminar 6 Oct... · 2 Background To UK Export Finance (“UKEF”) • UKEF is the operating name of the Export Credits Guarantee

ACCESSING UK EXPORT FINANCE SUPPORT

Liz McCrory

Export Finance Adviser, Northern Ireland

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Background To UK Export Finance (“UKEF”)

• UKEF is the operating name of the Export Credits Guarantee

Department (ECGD); it is a stand alone government department

• UKEF’s history dates back to 1919, making it the world’s oldest ECA

• We operate within the conditions set out under the OECD

Arrangement on Officially Supported Export Credits

• We provide insurance and other financial support which

complements what is available from the private market

• We are proud of our reputation as a long term partner, providing

financial support to UK exporters, and buyers of their products and

services

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Guidance to Exporters

Can provide advice or information alongside our own financial or insurance products

Can help companies make the right choices and help them to make

exports happen

Export Finance Advisers

Act as local points of contact to introduce

exporters and businesses with export

potential to finance providers, credit

insurers, insurance brokers, trade support bodies and sources of government support

Role Of Export Finance Advisers

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How Does UKEF Support Exporters?

• UKEF’s support falls into two broad categories

Mid/Long

Term

Products and

services that

support the

overseas

buyer

•Providing guarantees to banks on the loans they give to overseas

buyers to purchase goods and services from UK based

companies

•Providing lending directly

•Support in the Capital Markets

Short Term

Products and

services that

support the

exporter

•Reducing or removing the risk of non – payment from the

overseas buyer through insurance products

•Helping to support the bonding requirements of the contract

•Assisting with working capital needs

Short Term Products & Services

Overview

• We are now able support exporters of all sizes and sectors,

including exporters of services

• Provide guarantees to banks to support short-term trade finance

– Bond Support Scheme

– Export Working Capital Scheme

• Issue Export Insurance Policies to cover payment risk

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Bonding Requirements For Exporters

• When an exporter signs a contract with an overseas buyer, the

exporter may be asked to provide a bank bond

• There are several types of bonds:

– Advance payment bond

– Performance bond

– Warranty bond

– Bid bond

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Banks often ask exporters to provide cash to issue the

bond and cover the risk

=

Leave companies without the working capital they need

Banks will limit the total value of bonds they’ll issue for a

company

=

You might exceed this limit if you win several export

contracts and they all require bonds

Bonding Issues

UKEF Bond Support Scheme

• We provide government guarantees to participating banks who

issue bonds on behalf of UK exporters

• Support extends to all bonds related to an export contract

(e.g. performance, warranty, advance payment, bid bonds)

• Cover up to 80% of the bond value; no minimum or maximum

contract values or duration

Eligibility

• UK based exporter

• 20% Minimum UK content

Benefits

• The bank is able to issue the bond

• Sharing the risk with your bank enables it to issue more bonds on

your behalf or to issue a bond without requiring as much of your

cash or collateral - improves your working capital

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Export Working Capital Scheme

• We provide government guarantees to participating banks providing

trade finance loan facilities to UK exporters to fund export contracts

• Specific contract

• Covering up to 80% of the loan value

Eligibility

• UK based exporter

• 20% Minimum UK content

• Finance up to 75% of the contract value

Benefits

• The principal benefit for the UK exporter is that it is able to obtain the

necessary working capital finance from its lender to support an export

transaction in circumstances where its lenders may not have had

sufficient risk appetite for the full facility amount

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Export Insurance

• We insure exporters against the risk of not getting paid by overseas

buyers or of not being able to perform a contract due to specific

events (e.g. war, political or economic events)

• Specific contract

• No minimum contract / Premium starts from £ 250

• All sectors, up to 95% cover

• Not for EU / Rich OECD markets below 2 year risk horizon

Eligibility

• UK based exporter / Customer based overseas

• Exporter must have been unable to obtain insurance from private

sector

• 20% Minimum UK content

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Medium & Long Term Financing

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Financing For Overseas Projects

• UKEF can provide long term loans to support the project

• Any finance we bring to a project is linked to the purchase of goods

and services from the UK

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Financing For Overseas Buyers

• UKEF can offer an additional source of long term funding, with

repayment terms typically 2-10 years

– 100% unconditional guarantees for bank lending

– Direct lending

• Finance for up to 85% of contract value (minimum value GBP5m)

• Support in a range of currencies including GBP, USD, Euro, Yen

• Grace period may be considered for interest payments during

construction period

• Attractive interest rate (reflecting UK Government guarantee). This

can be on a fixed or floating basis

• Can support both public and private sector transactions and non-

recourse project financing, including PPP structures

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Eligibility

• Contract typically must be between a UK operating company and an

overseas buyer

– New legislation gives us ability, in principle, to support other types of

contractual arrangement

• Minimum 20% UK content, but ideally more

– UK content can include profit repatriated to the UK, and the UKEF

premium

– Remaining 80% from one or more third markets

– Local costs up to 30% of the exported element can also be financed

NMS International is leading a taskforce of UK

small and medium-sized firms building seven

hospitals in Ghana.

Aerial view of clinical buildings under

construction at Dodowa, one of the seven

hospital sites in Ghana

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In 2012, the firm won a US$175

million contract to design, build

and equip seven district hospitals

in Ghana.

In cases such as this the

agency can guarantee loans to

overseas buyers of UK goods and

services where the private market

needs support, or offer its own

loans to buyers directly.

Case study: NMS International Group

Strength in numbers

Conclusions

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Key Messages

• UKEF complements the private sector

• UKEF is ready to support projects involving exporters based in the

UK, and international buyers, with tried and tested product suite

• In particular, UKEF financing offers:

o Alternative source of funding

o Very flexible UK content requirements

o Long tenors

o Attractive funding costs

Liz McCrory Export Finance Adviser, Northern Ireland Tel: +44 (0)7435 32 32 31 Email: [email protected] General enquiries: internationalenquiries:@ukef.gsi.gov.uk

For further information please visit: www.gov.uk/uk-export-finance