Volker Bromund ECA case study USD 10 2016
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The document discusses buyer financing through export credit agencies. It provides an example of a German exporter providing goods to an Indonesian importer, with the import financing backed by a 95% loan from the importer's bank. The bank loan is insured by the export credit agency. Key benefits for importers include more favorable financing terms than local options, with longer tenors of 5-10 years and lower interest rates. Requirements for the importer include a minimum credit rating and financial profile.
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Volker Bromund ECA case study USD 10 2016
- 1. Volker Bromund, PT PRIME Consultancy, www.prime-consultancy.com Buyer Financing with Export Credit Agency (ECA) coverage case study - Volker Bromund PT PRIME Consultancy Jakarta, October 2016
- 2. Volker Bromund, PT PRIME Consultancy, www.prime-consultancy.com Indonesian Importer Comercial Contract Insures 95% of the loan amount Financing Agreement between Importer and Bank Reimbursement of LC after payment to Exporter Buyers Credit example German Exporter Import financing Importer opens LC German Manufacturer / Exporter Bank
- 3. General Description Credit for long term financing of capital goods and services based on the ECA cover Usually reimbursement to Importer who pays under LC to the Manufacturer, structures without LC can also be supported Minimum amount: US$ 2.0 mio Buyers Credit.
- 4. Advantages for the Importer/ Buyer: No charge to the importers credit lines Financing on top More cost efficient than local financing Low and attractive interest rates Typically no collateral, based on the credit standing of the borrower Tenor: from 5 up to 10 years depending on the value of the contract Buyers credit
- 5. Borrower Companies with good credit ratings Lender Any bank which accepts the proposal typically offshore bank Loan Amount max. 85 % of contract value (min. US$ 2 mio) Goods according to the Export Contract Capital goods (Country of origin from Germany, Austria or other country). Inclusion of supplies from third countries Besides, it is possible to a certain extent to include goods which originate not in Germany (so-called foreign content). The percentage which these supplies may reach depends on the country from which they originate. In principle supplies of goods worth up to 30 % of the contract value are permissible (indication only depends on the Export Credit Agency). Higher amounts may also be feasible and can be discussed. General Description Buyers Credit
- 6. Financing through a bank covered ECA loan 85 % of the contract value At least 15 % down-payment to be paid before delivery, if higher DP reimbursement with the loan ECA premium can be financed up to 100 % Tenor 5 - 10 years - depending on the contract value Payment in semi-annual installments, the first falls due 6 months after commissioning / COD (starting point) Loan disbursement to the importer after the exporter has confirmed that he has received the payment under the LC ECA Financing: Buyers Credit
- 7. Purchase Order: US$ 5,000,000 Tenor: 6 years Financing amount: US$ 4,250,000 (85% of the contract amount) ECA fee: approx. US$ 242,0000 (will be included in the financing amount) Total Loan Amount: US$ 4,492,000 Interest rate: 6 month LIBOR (presently 1%) plus a margin of 2.5% p.a. (currently total interest 3.5%) Commitment Fee: 1% p.a. (unutilized portion of the loan amount) Management Fee: 1,5 % flat Repayment: semi-annually, here 12 instalments Interest payment: semi-annually Governing Law: to be agreed on with the lender Case study Example Terms & Conditions for indication only!
- 8. Major pre-requisites for credit assessment on Corporate Risk Annual and interim reports Annual revenue more than EUR 20 million Assets above EUR 15 million Equity to be compatible with the contract value Additional information: Commercial and bank references Received foreign credits Credit history Description of export activities/ FX income Buyers credit: Pre-requisites.
- 9. Contact Details: Volker Bromund PT PRIME Consultancy Alamanda Tower 23rd Floor, Unit B, Jl. TB Simatupang Kav 23-24 12430 Jakarta, Indonesia Phone: +62 21 2276 7137 Mobile: +62 811 952651 volker.bromund@prime-consultancy.com www.prime-consultancy.com