- PowerPoint PPT Presentation

1 / 22
About This Presentation
Title:

Description:

Environmental Dynamics has used Ex-Im Bank to extend a $2,000 credit line to an ... PNC Bank, Pittsburgh, PA arranged a 5-year loan for Facileasing, S.A., Mexico ... – PowerPoint PPT presentation

Number of Views:75
Avg rating:3.0/5.0
Slides: 23
Provided by: cart2
Category:
Tags: bank | pnc

less

Transcript and Presenter's Notes

Title:


1
Financing Water and Wastewater Treatment
Projects
  • Craig OConnor
  • Environmental Liaison Officer

2
U.S. Ex-Im Bank
  • Independent agency of the U.S. government.
  • Established in 1934 to finance the export sales
    of goods and services produced in the U.SSince
    1934, has supported over 400 billion in exports.
  • Supports short, medium, and long-term financing
    to creditworthy international customers both
    public- and private-sector working capital
    guarantees to U.S. exporters.
  • Products include Direct Loans, Guarantees, Export
    Credit Insurance, Working capital Guarantees,
    Tied Aid Fund.
  • No minimum nor maximum project size.
  • Special initiatives for environmental exports,
    small business, and lending directly to
    municipalities.

3
Ex-Im Bank Value Proposition
  • What does Ex-Im Bank bring to the table?
  • Ability to directly extend credits to private-
    and public-sector buyers, in-country utilities,
    equipment dealers, or government agencies
  • Ability to support small projects No minimum
    project size helps smaller in-country deals
  • Environmental Dynamics has used Ex-Im Bank to
    extend a 2,000 credit line to an overseas
    customer
  • Ability to support loan repayment terms of 10
    years
  • Ability to support interest rates based on small
    spread over commercial banks cost of funds (U.S.
    LIBOR)
  • Ability to help leverage USAID, GEF and other
    donor funds

4
Environmental Exports Program
  • Support for environmentally-beneficial exports,
    including wastewater treatment plants, mandated
    in Ex-Im Banks Charter.
  • Ex-Im Bank has Environmental Standards and
    Guidelines applied to each project considered
    under its Loan and Guarantee Programs.
  • Environmental Exports Program Consists of
    pro-active business development and enhancements
    to existing Ex-Im Bank programs.
  • Environmental projects are offered enhancements
  • Maximum OECD repayment term for Long-Term Loans
    and Guarantees of 10-15 years after project
    completion.
  • Capitalization of interest during construction.
  • Up to 15 local cost support within the U.S.
    scope of supply.
  • RESULTS Transactions approved under the Program
    grew from
  • 13 in FY 1994, to 71 in FY2004, totaling
    over 1.5 billion.

5
Export Credit Insurance
  • Enables U.S. exporters to offer short- and
    medium-term credit directly to their customers.
  • Export credit is an attractive substitute to
    cash-in-advance, letters of credit and costly
    local bank financing.
  • Using Ex-Im Bank to insure a letter of credit
    instead of paying bank confirmation charges is
    usually more cost effective.
  • Example Insurance costs 0.11 or 110 for a
    100,000 sight letter of credit vs. 2,500
    minimum bank confirmation charge.
  • Supports repayment terms up to 180 days beginning
    from date of importation of the goods capital
    goods terms of 360 days-7 years.
  • Only an invoice of the sale needed for short-term
    credit Ex-Im Bank provides a promissory note to
    document medium-term credits.
  • Insurance lowers reserve requirements for
    commercial banks.

6
Case Study Aquamatch, Inc.
  • Aquamatch, Inc. of Laguna Hills, CA is using
    Ex-Im Banks Short-Term Multi-buyer Insurance to
    offer open account credit terms to buyers in
    Mexico, Saudi Arabia, Turkey, Italy, and the
    Philippines, among others.
  • Aquamatch, Inc. is a small business manufacturer
    of water purification products that also provides
    services for the design and installation
    wastewater treatment plants.
  • Aquamatch, Inc. sought Ex-Im Banks Insurance to
    be more competitive in granting open account
    credit terms which are routinely offered by
    their European competitors.
  • With Ex-Im Banks Insurance, Aquamatch, Inc. is
    able to assign its insured receivables as
    collateral for an SBA loan to further grow its
    business.

7
Case Study Monarch Separators
  • Monarch Separators Inc., a Houston, TX, a small
    business with 10 employees is using Ex-Im Banks
    Short-Term Insurance to expand their export
    sales.
  • Monarch Separators Inc., manufactures oil-water
    separation equipment as well as other pollution
    control equipment.
  • Using Ex-Im Banks Insurance, Monarch is able to
    offer open account credit terms of up to 180
    days to customers such as Pemex, PDVSA, and China
    Petroleum Company.
  • Monarchs open account terms replace costly
    local bank financing and payment by local bank
    letters of credit.
  • Monarchs sales are expected to INCREASE by 1
    MILLION next year by using more aggressive credit
    terms.

8
Case Study US Filter in China
  • U.S. Filter required a confirmed L/C to support
    their sale of 520,000 in water treatment
    equipment to a buyer in China
  • Chinese banks do NOT allow their L/Cs to be
    confirmed
  • In order for a U.S. bank to confirm an L/C, the
    issuing bank must request confirmation in the
    original L/C
  • U.S. Filters bank was unwilling to provide a
    silent confirmation a commitment to pay the
    exporter under the L/C without actual
    confirmation because it would payment risk of
    the issuing bank.
  • The Short-Term Single Buyer Policy provided 95
    commercial coverage, 100 political coverage to
    U.S. Filter against the risk of default of the
    L/C issued by China Construction Bank.
  • Insurance costs 0.08 or 80 for a 100,000
    letter of credit
  • With the Insurance in place U.S. Filter now in a
    position to assign the L/C to its bank for
    immediate funding.

9
Short-Term Credit Process
  • 1. The U.S. supplier submits the application
    along with the required information to establish
    a credit limit for the foreign customer to Ex-Im
    Bank.
  • 2. The information requirements from the foreign
    company for credit limits are as follows
  • 10,000 credit a favorable trade or bank
    reference.
  • 10,000-50,000 credit a current credit report.
  • 50,000-100,000 credit a current credit report
    plus a favorable bank or trade reference.
  • Over 100,000 credit a current credit report,
    latest 3 years financial statements, and
    references.
  • 3. Ex-Im Banks Loan Officer analyzes the
    application and makes a decision on the amount of
    credit to be supported.

10
Medium-Term Guarantee Process
  • 1. The Guaranteed Lender bank submits the
    application for Final Commitment under its Master
    Guarantee Agreement along with the required
    information to establish the credit limit for the
    foreign customer.
  • 2. The information requirements from the foreign
    company for Medium-Term credit limits are as
    follows
  • A current credit report.
  • A current commercial bank reference.
  • Latest 3 years financial statements interim
    statements if the latest years financial
    statement is older than 1 year.
  • Note audited statements required for credits
    over 1MM
  • Copy of the export contract.
  • 3. Ex-Im Banks Loan Officer analyzes the
    application and makes a decision on the amount of
    credit to be supported.

11
Medium-Term Credit Standards
  • Positive Operating Profit over last 2 years
  • Positive Net Income over last 2 years
  • Positive Cash-Flow-From-Operations (latest year)
  • EBITDA/Debt Service greater than 150
  • Total Liabilities/Total Net Worth less than 175
  • Ex-Im Bank Exposure/Total Net Worth less than 40
  • Borrowers that meet these standards very likely
    to be approved. If the borrowers misses one or
    more of the standards, Ex-Im Bank will conduct
    further analysis of the borrowers business to
    determine whether to grant approval.

12
Loan Guarantee Program
  • Guaranteed Loans made by commercial banks (U.S.
    or foreign) to a foreign buyer with a 100
    unconditional repayment guarantee from Ex-Im Bank
  • Guarantee covers 85 of the U.S. content of the
    transaction.
  • Negotiated interest rates, usually a floating
    rate based on spread over 6-month U.S. dollar
    LIBOR rate
  • Loan fully transferable, can be securitized
  • Banks often finance the 15 required cash payment
  • Guarantee available in major foreign currencies

13
Case Study Nafin
  • Nafin - a Mexican Government development bank
    that is also a partner bank with Ex-Im Bank under
    the Master Guarantee Program used Ex-Im Banks
    Loan Guarantee Program to provide a PESO loan to
    Industrias Islas S.A. of Nuevo Leon.
  • Nafin provided a 7-year loan to finance the
    purchase by of a 352,150 ultrafiltration water
    treatment system from A2 Water Process Solutions,
    Inc. of Gregory, Texas.
  • Nafin provided the 7-year Peso loan term at a
    very attractive rate of interest to support the
    sale.
  • Under Ex-Im Banks Environmental Exports Program,
    Nafin provided a second 7-year loan trance of
    52,823 to finance the 15 local costs that
    included software as well as installation of the
    system.

14
Case Study Facileasing, S.A.
  • PNC Bank, Pittsburgh, PA arranged a 5-year loan
    for Facileasing, S.A., Mexico City, to purchase
    1 million in U.S.-made equipment.
  • The equipment includes a desalination plant,
    solar panels, laundry equipment, and golf carts
    which Facileasing, S.A will lease to the Hotel
    Marival Cancun on 5-year lease payment terms.
  • Facileasing, S.A, based in Mexico City, offers
    both finance and operating leases with payment
    terms ranging from 12-60 months.
  • Facileasing, S.A.s customers include both
    Mexican and U.S. and other multinational
    companies, in the food, pharmaceutical, and
    printing sectors.
  • Facileasing, S.A. retains title to the leased
    assets for the entire term of the lease.

15
Case Study Venezuela
  • Ex-Im Banks Loan Guarantee Program has financed
    over 300 million of an ongoing wastewater
    treatment program for Venezuelas Ministry of
    Environment and Renewable Natural Resources
    (MARNAR).
  • MARNARs ongoing program focuses on providing
    water and wastewater treatment services for
    municipalities.
  • MARNR acts as the borrower with a loan repayment
    guarantee provided by the Ministry of Finance.
  • MARNAR received a 10-year repayment term
    beginning 6-months after project completion,
    capitalized interest during construction, and 15
    local cost support.
  • Harza Engineering, among others, have supplied
    water treatment equipment and engineering
    services.

16
What Can Ex-Im do for Small Projects?
  • Ex-Im Bank can make a credit decision about a
    potential project in one of three ways
  • 1)    Based strictly on the balance sheet of the
    borrower or a guarantor
  • 2)    As limited recourse project finance with a
    special purpose company borrower and project cash
    flows as the source of repayment
  • 3)    Or, as a structured finance transaction
    with the borrowers balance sheet enhanced by
    special features.
  • Many projects are too large to be feasible
    strictly on a balance sheet but too small to
    merit the time and expense associated with
    project finance transactions.
  • Structured finance may be an alternative.

17
What Makes a Financing Structured?
  • Structured finance involves elements of both
    corporate and limited recourse project finance.
    Like corporate finance, it involves full recourse
    to the project sponsors balance sheet.
  • Like project finance, it involves special
    features to enhance the credit of the borrower,
    including (but not necessarily limited to) one or
    more of the following 
  • 1.  Special purpose accounts, including
    offshore payment accounts, escrow or reserve
    accounts, or other accounts that would be subject
    to Ex-Im Banks control
  • 2.  Covenants and default provisions such as
    financial ratios or debt service coverage
    requirements that would, if violated, prevent
    payment of dividends to the sponsors
  • 3. Insurance requirements that might be more
    strict than those typically applicable under
    corporate insurance policies
  • 4. Letters of credit or other sources of
    funds that would be pledged by the sponsor to
    Ex-Im Bank through a bank or other third party.

18
Case Study Structured Finance
  • 1. Northrop Grumman wins contract to supply
    equipment/services to Sakaeronavigatsia (SAK) of
    Georgia
  • Challenge Ex-Im Bank closed in Georgia at the
    time
  • 2. SAK and Intl. Air Transport Assn. (IATA)
    contract for billing and collection of overflight
    revenueAirlines, both western and NIS, pay
    over-flight fees into an escrow account in
    Switzerland.
  • 4. Transaction creditworthy based on ability
    of SAK to perform billing, ability of airlines to
    pay over-flight into escrow account
  • 5. Bank of New York made the loan to SAK to
    purchase the equip/services with Ex-Im Bank
    Guarantee.
  • 6. Semi-annual PI payment made from escrow
    account Excess funds, above reserve and debt
    service, paid to SAK
  • Water, clean energy companies could use this
    structure to sell clean water or energy to
    creditworthy international customers.

19
New Initiative Sub-sovereign Lending
  • Recognizes emerging market for U.S. environmental
    firms foreign cities, states, and other
    sub-sovereign government entities.
  • Ex-Im Bank supports Loans/Guarantees to
    sub-sovereign entities
  • Foreign currency debts are not in default
  • Rated B/B2 or stronger by accepted global credit
    rating agency.
  • The global credit rating agencies whose ratings
    may be used
  • Standard Poors, Moodys, Duff Phelps,
    Fitch/IBCA, and Japan Credit Rating.
  • New initiative immediately qualifies subsovereign
    entities in
  • Argentina, Brazil, Bulgaria, China, Colombia,
    Croatia, the Czech Republic, Estonia, Latvia,
    Malaysia, Poland, Slovakia, and South Korea.

20
Working Capital Guarantee
  • Ex-Im Bank provides 90-100 repayment Guarantee
    for working capital loans, revolving or
    transaction based, made by commercial lenders to
    small businesses to finance export sales.
  • The Working Capital Guarantee serves as the
    collateral to the commercial lender by mitigating
    the risk inherent when the source of repayment
    for the loan is an overseas contract.
  • Enables exporters to finance materials, labor,
    and overhead to produce goods/services for
    export.
  • Enables exporters to cover standby letters of
    credit for bid and performance bonds, or payment
    guarantees.
  • Enables the exporters to finance foreign sales
    receivables.
  • Most Working Capital Guarantees by Delegated
    Authority Lenders (see www.exim.gov for a list)
    without prior Ex-Im Bank approval.

21
Case Study Anguil Environmental
  • Ex-Im Banks WCGP made a number of working
    capital loans to Anguil Environmental to support
    its export sales.
  • Ex-Im Banks WCGP made possible a 1.25MM loan to
    Anguil Environmental from Firststar Bank to
    support a 2.9MM contract with Formosa Chemical
    and Fibre Corp.
  • Formed in 1978 by Mr. Gene Anguil, the company
    designs, builds, and installs custom-built
    industrial pollution control systems.
  • Ex-Im Banks WCGP critical in this case given
    that Anguil is a small business with limited
    resources, and the source of repayment an
    overseas contract.

22
Conclusion
  • Ex-Im Bank supports short, medium, and long-term
    financing to creditworthy international
    customers, and working capital guarantees to U.S.
    exporters.
  • Ex-Im Bank enables U.S. exporters to arrange the
    most attractive source of credit directly for
    their customers.
  • Ex-Im Banks programs provide the most attractive
    financing option for foreign small- and
    medium-sized firms to purchase of U.S. goods and
    services.
  • Ex-Im Bank is interested in any size project.
  • http//www.exim.gov
  • Craig.oconnor_at_exim.gov
Write a Comment
User Comments (0)
About PowerShow.com