Presentation on theme: "UK Export Finance Products and Services"— Presentation transcript:
1 UK Export Finance Products and Services Jonathan LeonardSouth Tyneside Manufacturing ForumUK Export Finance 05/02/2013
2 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.
3 UK Export Finance Export and Investment Guarantees Act 1991 Trade Minister: Lord Green (same as UKTI)HM Treasury “Consent” controls activityComplement but not compete with private marketExport Credit Guarantees DepartmentrebrandUK Export Finance operates under an Act of Parliament and with the oversight of HM Treasury.Minsters have set out that we are there to complement, not compete with, the private sector.Our short term trade credit insurance business was privatised in 1991 (sold to NCM; now Atradius). But after a gap of nearly twenty years, we recently returned to it when a lack of available capacity from the private sector became apparent.I will come onto this later.UK Export Finance 05/11/2012
4 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.
5 Business activity Deals done range from c.£10k to £2.3bn £19bn exposurec£3bn new business annuallyServices, as well as goods, e.g. consultancyExpanded remit to cover all sectors; not just capital and semi-capital goods and related servicesForeign content up to 80%Unconditional AAA guaranteeUK Export Finance 05/11/2012
6 New short term products from the UK’s export credit agency Bond support schemeExport working capital schemeShort-term credit insurance (EXIP)Letter of credit guarantee schemeUK Export Finance 05/11/2012
7 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 metUp to 80% for advance payment and progress payment bondsUK 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 securityFourteen banks participatingUK Export Finance 05/11/2012
8 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 beforeOur credit risk is on UK exporter; willing not to share in bank’s fixed and floating charge, but only share in contract-related securitySix banks participatingUK Export Finance 05/11/2012
9 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 eventsAll sectors and up to 95% coverCan be introduced by brokerNot for EU / rich OECD markets below 2 year risk horizonNot whole turnover businessUK Export Finance 05/11/2012
10 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 creditEight UK banks participatingLimits in place for 305 banks in 38 marketsBank retains documentation riskTurning now to the ‘new’ products.The LCGS, as I mentioned earlier, was introduced in 2009.It brings extra capacity in order to benefit UK exporters, as the UK bank is able to confirm a letter of credit even if it doesn’t have risk appetite on the foreign issuing bank for the full amount.The exporter is protected against a default of the foreign buyer and the foreign bank.UK Export Finance 05/11/2012
11 Main markets Bahrain Sri Lanka UAE (Dubai / Abu Dhabi) Nigeria IndonesiaEgyptBangladeshUkraineRussiaSouth AfricaSaudi ArabiaThe PhilippinesOmanLibyaTrinidad & TobagoPapua New GuineaKazakhstanPakistanVenezuelaUruguayMalaysiaGhanaAlgeriaTaiwanBrazilTurkeyIraqUK Export Finance 05/11/2012
12 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 accountsManagement accountsBusiness planCash flow & P&L forecastsUKEF undertake:Credit risk assessmentUKEF provide a “commitment” to the bank and papers signed.Bank notifies UKEF when the bond is issued or finance drawn.
13 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.
14 Case Study – Pinnacle Re-Tec Ltd Regularly need to provide advance payment guarantees / bondsPreviously, HSBC asked for ‘cash cover’ for 50% of the bond valueWhilst pleased their bank supported them, tying the cash up for the period of the bond impacted cash flowRecently won contract worth in excess of £700k where an advance payment guarantee and performance bond was requiredUK Export Finance provided the bank with a guarantee for 80% of the APG and 50% of the performance bondNo ‘cash cover’ was neededUK Export Finance 27/03/2012
15 Credit Insurance Finance Guarantees How to Apply UK Export Finance directly; orInsurance brokerFinance GuaranteesBond Support, Working Capital Support, Foreign Exchange Credit Support, Letter of Credit Guarantee - speak to your bankUK Export Finance 05/11/2012