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UK Export Finance Products and Services
Jonathan LeonardSouth Tyneside Manufacturing Forum
UK Export Finance 05/02/2013 1
What do we want you to get from today's event?
• An increased awareness of UK Export Finance.
• Better understanding of our products and services.
• How they can potentially help your business to grow.
• The role of the regional Export Finance Adviser.
• Understanding of the roles played by the banks and insurers.
• What the application process looks like.
2
UK Export Finance
• Export and Investment Guarantees
Act 1991
• Trade Minister: Lord Green (same as
UKTI)
• HM Treasury “Consent” controls
activity
• Complement but not compete with
private market
• Export Credit Guarantees Department
• 2011 - rebrand
3UK Export Finance 05/11/2012
Why have we introduced Export Finance Advisers across the UK?
• To get our message out to a wider audience.
• To work more closely with all the key parties in the regions e.g. Banks, Brokers, Chambers etc.
• Shorten the lines of communication between London and the regions.
• To make it easier for UK businesses to export overseas and....
• Ultimately to help the UK economy.
4
Business activity
• Deals done range from c.£10k to £2.3bn
• £19bn exposure
• c£3bn new business annually
• Services, as well as goods, e.g. consultancy
• Expanded remit to cover all sectors; not just capital and semi-capital goods and related services
• Foreign content up to 80%
• Unconditional AAA guaranteeUK Export Finance 05/11/2012 5
New short term products from the UK’s export credit agency
• Bond support scheme
• Export working capital scheme
• Short-term credit insurance (EXIP)
• Letter of credit guarantee scheme
UK Export Finance 05/11/2012 6
Contract Bond Support Scheme
• Where a participating bank issues a contract bond (or procures its issue by an overseas bank) for UK export contract, we normally guarantee 50% of the bond if our minimum risk standard is met
• Up to 80% for advance payment and progress payment bonds
• UK Export Finance’s credit risk is on the UK exporter; willing not to share a bank’s fixed and floating charges but only share in contract-related security
• Fourteen banks participating
UK Export Finance 05/11/2012 7
Export Working Capital scheme
• We provide guarantees to banks to cover the credit risks associated with export working capital facilities in respect of specific export contracts. UK Export Finance formally guarantees 50% of risk:
– useful where a UK exporter wins an overseas contract that is higher in value than is typical, or succeeds in winning more overseas contracts than it has done before
• Our credit risk is on UK exporter; willing not to share in bank’s fixed and floating charge, but only share in contract-related security
• Six banks participatingUK Export Finance 05/11/2012 8
Export insurance policy (EXIP)
• Insures exporter against risk of not being paid or of not being able to recover costs of performing export contract due to specified events
• All sectors and up to 95% cover
• Can be introduced by broker
• Not for EU / rich OECD markets below 2 year risk horizon
• Not whole turnover business
UK Export Finance 05/11/2012 9
Letter of credit guarantee
• Where a UK bank adds its confirmation to a letter of credit issued by an overseas bank for a UK export, we guarantee up to 90% of value of letter of credit
• Eight UK banks participating
• Limits in place for 305 banks in 38 markets
• Bank retains documentation risk
10UK Export Finance 05/11/2012
Main markets
• Venezuela
• Uruguay
• Malaysia
• Ghana
• Algeria
• Taiwan
• Brazil
• Turkey
• Iraq
• South Africa
• Saudi Arabia
• The Philippines
• Oman
• Libya
• Trinidad & Tobago
• Papua New Guinea
• Kazakhstan
• Pakistan
• Bahrain
• Sri Lanka
• UAE (Dubai / Abu Dhabi)
• Nigeria
• Indonesia
• Egypt
• Bangladesh
• Ukraine
• Russia
UK Export Finance 05/11/2012 11
Application Process For Bank Guarantee Products
• Please contact your regional Export Finance Adviser in the first instance who will be able to give you an early indication on whether your enquiry meets our initial criteria.
• Exporter and Bank then complete an application form and submit to UKEF along with:
– Last 3 years accounts
– Management accounts
– Business plan
– Cash flow & P&L forecasts
• UKEF undertake:
– Credit risk assessment
• UKEF provide a “commitment” to the bank and papers signed.
• Bank notifies UKEF when the bond is issued or finance drawn.
12
Application Process For Export Insurance Product
• Please contact your regional Export Finance Adviser in the first instance who will be able to give you an early indication on whether your enquiry meets our initial criteria.
• You can either apply direct using the application form on our website, or through your broker.
• If you are unsure of, or doubt the creditworthiness of your overseas buyer, you can ask UKEF to look at them on your behalf with a view to assessing their standing.
• UKEF will consider your application and if approved, will issue an offer letter and policy.
• Once the exporter has signed the policy, paid any premium required and we have countersigned the policy, cover is then in place.
13
Case Study – Pinnacle Re-Tec Ltd
UK Export Finance 27/03/2012 14
• Regularly need to provide advance payment guarantees / bonds
• Previously, HSBC asked for ‘cash cover’ for 50% of the bond value
• Whilst pleased their bank supported them, tying the cash up for the period of the bond impacted cash flow
• Recently won contract worth in excess of £700k where an advance payment guarantee and performance bond was required
• UK Export Finance provided the bank with a guarantee for 80% of the APG and 50% of the performance bond
• No ‘cash cover’ was needed
How to Apply
• Credit Insurance – UK Export Finance directly; or
– Insurance broker
• Finance Guarantees– Bond Support, Working Capital Support, Foreign Exchange
Credit Support, Letter of Credit Guarantee - speak to your bank
UK Export Finance 05/11/2012 15
www.ukexportfinance.gov.uk 07818 570615