The Export-Import Bank
Financing Export Sales and
International Leasing
Craig O’Connor, Director
International Business Development Group
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.S. : over $450 billion in exports supported.
•
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 in certain countries.
Export Credit Insurance
•
Enables U.S. exporters, captive and vendor financiers, leasing companies, and
banks to offer short- and medium-term credit and leases directly to their
customers.
•
Export credit is an attractive substitute to cash-in-advance, letters of credit and
costly local bank financing.
•
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.
Short-Term Single Buyer Policy
•
Covers short-term export credit sales made by a exporter to a single foreign
buyer during a 12-month policy period.
– Can support single or multiple shipments
•
Provides 90% commercial, 100% political coverage against buyer payment
defaults, $0 loss deductible.
•
A “lock-in” feature commits Ex-Im Bank coverage offer over a 90-day period –
useful when sale still in negotiation stage.
•
“Enhanced” assignment of exporter’s receivables to banks for immediate
funding available.
•
Premium rates based on a fixed fee schedule based on the term of the credit,
type of buyer, and country of the buyer.
Financial Institution Buyer Credit Policy
„ Covers extension of SHORT-TERM direct buyer credit loans
„ Premium rates based on the term of the credit, the type of buyer, and
the country of the buyer.
„ Offers 90% commercial coverage (“Pass-back” allowed) and 100%
political coverage - no loss deductible
„ Documentary Assignment: financial institution protected against
fraud, disputes and other defects of the transaction
–
Lender has duty to obtain:
• Copy of invoice
• Export bill of lading
• Exporter Certificate
Medium-Term Credit Insurance
•
Medium-Term Export Credit Insurance has the following features:
– Repayment terms of 1-5 years, with 7-year terms for environmental
projects over $350,000.
– The credit must be evidenced by a valid and enforceable
promissory note.
– Ex-Im Bank provides exporter/bank with a note to use.
– 100% coverage against commercial and political default.
– The buyer makes a 15% down payment to the exporter.
OPERATING LEASE POLICY
•
Ex-Im Bank's coverage for operating leases was designed around a general lease
transaction concept in which:
–
payments total less than full value of leased products;
–
there is no intention on the part of the lessor to transfer title to the leased product
to the lessee at the end of the lease period;
–
the lessor keeps the risk that the leased products will decline in market value at a
greater rate than expected.
•
The Operating Lease Policy: two parts which may be purchased together or separately:
1.
Coverage for Stream of Payments: coverage for the stream of payments falling due
during a repossession-efforts period after default of the lessee; Coverage for the
stream of payments is provided at a maximum of 100 percent for sovereign lessees
and 90 percent for all others.
2.
Coverage Against Governmental Prevention of Repossession (GPR): insure the
political risk of prevention of repossession of the leased products due to specific
government actions, including, but not limited to, expropriation, confiscation and
cancellation of export license; coverage provided at 100% for all lessees
Finance Lease Guarantee
•
Eligible Lessors
• US entity (cross border lease)
• Host country entity (local lease)
• 3rd country (international lease)
• Only Finance Leases as defined by IAS 17 eligible for Ex-Im Bank guarantee
– Type of Entity
• Financial institution or affiliate, leasing company
• MGA is not set up for supplier credits, but lessor may be related to supplier/manufacturer (e.g.,
captive leasing affiliate)
•
Provisions in Lease Agreement Required by Ex-Im Bank (Schedule B-6 to MGA) includes:
• Payments of rent are unconditional (not subject to set-off, etc.)
• Cannot sublease, sell or create liens on items
• Net lease only (maintenance is lessee’s obligation)
• Termination values – lessee must pay that amount if defaults or asset is destroyed
•
Available under Lease MGA
• Electronic compliance (approved lease deliveries)
• Fixed & Floating rates
• Local costs, ancillary services
• Foreign currency
Medium-Term Lease Guarantee Process
1. The Guaranteed Lender bank submits the application for Final Commitment
under its Master Lease Guarantee Agreement.
2. The information requirements from the foreign lessee 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 year’s
financial statement is older than 1 year.
• Note: audited statements required for credits over $1MM
•
Application must include either (a) Ex-Im letter of prior approval or (b)
Documentation for Ex-Im Bank Legal Division review: copy of lease, legal
opinion from reliable 3rd parties
– Opinion addresses validity/enforceability risk
– “Standard” lease agreement not practical Æ Ex-Im will need to approve
lease agreement format
3. Ex-Im Bank Loan Officer analyzes the application, recommends a decision
based on amount of the lease, Ex-Im Bank’s Medium-Term Credit Standards.
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.
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 can be a valuable resource for captive
finance companies, and lessors, to finance and lease
U.S. – made equipment.
• Ex-Im Bank is interested in any size project.
• Internet
http://www.exim.gov
John Deere Credit – Growing
Globally
John Sabroske
Director
Global Trade Finance
John Deere Credit
World Headquarters
John Deere
z Founded
in 1837, John Deere is
one of oldest Companies in U.S.
John Deere
Today
JDC Evolution
Wind Energy
$20B in Receivables
JDC has operations in 15 countries
JDRP created
Wholesale receivables transferred
JDC moves to Johnston
AFS formed
Arrendadora John Deere
JDCRP brought in house
JDC formed
RV & Marine financing
Farm Plan purchased
John Deere Finance Limited formed
John Deere Credit Company formed
1958 1978 1984 1986 1988 1996 1999 2001 2002 2003 2004 2005
Strategic Intent
Deliver Consistent, Quality Earnings and
Maximize Deere Enterprise SVA by:
z Capturing
All Deere Equipment and
Related Finance Business, and
z Earning A Preeminent Position in the
U.S. and Canadian Agricultural
Financial Services Market
Adding Enterprise Value
z
Intimate knowledge of markets,
customers and dealers
z Strong risk management skills
z Consistent presence in Deere markets
z Worldwide support of Deere equipment sales
z Strong growth platform through AFS
z Consistent, strong earnings year over year
Key JDC Facts
z
z
z
z
z
z
World Headquarters located in Johnston, IA
1700 employees worldwide (approx 900 in
Johnston
One of the largest equipment finance
companies in the US
Arrendadora John Deere was our first office
outside of the US & Canada (1996)
Today, we have operations in 16 countries
Over 2 million customers worldwide
2005 Results
z
Record Volume: $31.1B
z Record Managed Receivables: $20.5B
z Net Income: $317.4M
z SVA: $72MM
z ROE: 15.2%
JDC Growth
Volume
Net Income
$35
$350
$30
$300
$25
$250
$20
$200
$15
$150
$10
$100
$5
$50
$0
1994
1996
$ in billions
1998
2000
2002
2004
$0
1994
1996
$ in millions
1998
2000
2002
2004
JDC Contribution
Net Income
($ millions)
$2,000
$1,500
$1,000
$500
$1990
1992
1994
1996
1998
2000
$(500)
$(1,000)
$(1,500)
JDC
Deere & Co
2002
2004
Financing Products Offered
JDC provides the following finance
products to facilitate the sale of
Deere products and services:
z Installment Financing
z Leasing
z Revolving Credit (JDCRP)
z Wholesale/Floor Plan
Financing Products Offered
JDC provides the following financial
services to accommodate the needs of ag
producers:
z Operating Loans
z Revolving Credit (Farm Plan)
z Wholesale
z Crop Insurance
z Wind Energy (equity & debt financing)
Receivables by Product
Wholesale
Lending
$3.8B
Operating
Loans
Revolving
$0.4B
$1.6B
Installment
Lending
$12.5B
Leasing
$2.2B
2005 Managed Receivables: $20.5B
Volume by Product
Revolving
$3.5B
Operating
Loans
$1.3B
Installment
Lending
$6.6B
Leasing
$1.1B
Wholesale
Lending
$18.6B
FY 2005 Total Volume: $31.1B
JDC Portfolio By Market
Golf & Turf
$268M
C&CE
$2.3B
2005 Total
Managed Portfolio
$20.5B
C&F
$4.2B
Ag Financial Services
$1.3B
Ag Equipment
$12.4B
Receivables by Geography
Canada
9%
Europe
8%
Latin
America
4%
2005 Total
Managed Receivables
$20.5B
Australia
4%
United States
75%
John Deere Credit International Operations
Canada
U.S.
U.K.
Germany
Luxembourg
France
Italy
Spain
Portugal
Finland
Mexico
Brazil
Argentina
Opened since 1996
Australia
South Africa
New
Zealand
International Lending
z
z
z
Since 1996, JDC has expanded operations
to 14 countries outside the US and Canada.
25% of Managed Receivables were
generated outside of the US in FY 2004
Global Trade Finance
Global Trade Finance Group…Mission
Support the sale of John Deere equipment in all
emerging and growth markets while adding
shareholder value by providing cost efficient dealer
and customer financing through:
1. Direct financing,
2. Third party financing, and
3. Development and structuring of in-country
financing facilities.
Global Trade Finance Group…Products
1. ECA financing
– Utilization of all Deere-relevant ECA’s; EXIM, Finnvera/EKN and Hermes
– GTFG will be the focal group within Deere for all ECA activities
– Market competitive funding through JDC or other sources
2. Customer retail & lease financing facilities
– Development & structuring of facilities tailored to local customers
– Through direct JDC participation or local/global banks including multibilateral financial institutions
3. Individual transaction/customer financing
– Financing individual (non-ECA) transactions
– Funding JDC acceptable receivables (S-T or M-T)
4. Dealer financing
– Directly through JDC or with other financial institutions
Global Trade Finance Group
ECA’s
z
Here are the key ECA’s for Deere . . . . .
z
EXIM for US sourced equipment
– Construction equipment to Americas & Caribbean
– Ag equipment, primarily Waterloo tractors > 175 HP,cotton pickers, &
CAMECO product line
z
Finnvera & EKN
– Timberjack to E/C Europe & Brazil
z
Hermes
– German combines and tractors <150 HP
Global Trade Finance Group
Selected Non-JDC Financial institutions
z Local commercial banks
– Important to identify and understand key local commercial banks
z
Global commercial banks
– Leverage Deere relationship
z
IFC
– An important partner leasing/retail financing worldwide
Global Trade Finance Group
Selected Non-JDC Financial institutions
z IDB
– A multilateral financial institution promoting investment and
supporting project finance in the Americas
z EBRD
– Potential partner for retail financing in E/C Europe
– It also provides trade finance products for reducing
transaction risk
Global Trade Finance Group
Selected Non-JDC Financial Institutions
Private Sector Companies:
z Exporter’s Insurance
–
–
–
–
–
z
Flexible coverage and requirements
Very few country limitations
No country of origin issues
Flexible premium structure
New or used equipment, exported or to be exported
FCIA
– Coverage & requirements similar to EXIM
– Limited deal size and country exposure
Global Trade Finance Group
Selected Non-JDC Financial Institutions(cont’d)
Private Sector Companies:
z
AIG
– Flexible coverage & requirements, preferring S-T
– Limited deal size and country exposure
– Premiums more costly, longer claim period
z
Lloyds
– Same comments as with AIG
– Premiums more costly, long claim period
John Deere in China
z Two
manufacturing locations:
– Jiamusi for combine harvesters
– Tianjin for tractors
John Deere in China
z Currently
working with local
Chinese bank for retail financing
z Establishment of local leasing
company not in immediate future:
– Volume issues
– Cost of entry
– Credit information issues
John Deere in China
z Cont’d
– Legal infrastructure issues, e.g.
repossession
– Dealer strength for risk sharing
Questions?