Plenary II - Glen Dooley


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Plenary II - Glen Dooley

  1. 1. Financing your Global Expansion Glen Dooley (for Ruth Bender) June 18, 2003
  2. 2. Scope <ul><li>Profile of An International Bank - WACHOVIA </li></ul><ul><li>Understanding and Managing Risk </li></ul><ul><li>Trade Finance/Letters of Credit </li></ul><ul><li>Structured Trade Credit </li></ul><ul><li>Asset-Based Finance </li></ul><ul><li>Clean Credit </li></ul>
  3. 3. WACHOVIA CORPORATION - SUPERIOR MARKET SHARE AND A DISTRIBUTION POWERHOUSE <ul><li>MANAGEMENT: G. Kennedy Thompson –Chairman, President and CEO </li></ul><ul><li>HEADQUARTERS: Charlotte, North Carolina </li></ul><ul><li>US RANKINGS: Largest deposit share on the East Coast, second largest U.S. share Second largest cash management provider Third largest branch network Fifth largest in assets Fifth largest brokerage firm based on registered representatives </li></ul><ul><li>TOTAL ASSETS: $342 billion </li></ul><ul><li>MARKET CAP: $ 49 billion </li></ul><ul><li>BRANCHES: 2800 </li></ul><ul><li>ATMs: 4600 </li></ul><ul><li>EMPLOYEES: Over 84,000 </li></ul>(As of 12/31/02)
  4. 4. WACHOVIA CORPORATION As of 12/31/02 Citigroup $180.9 Bank of America 104.4 Wells Fargo 79.0 Wachovia 49.4 J.P. Morgan Chase 47.9 Bank One 42.5 U.S. Bancorp 40.6 Fifth Third Bancorp 33.6 FleetBoston Financial 25.5 Bank of New York 17.4 BB&T 17.4 National City Corp 16.7 SunTrust 16.0 PNC Financial 11.9 KeyCorp 10.6 Market Capitalization of Banks Dollars in Billions Citigroup $1,097.1 J.P. Morgan Chase 758.8 Bank of America 660.4 Wells Fargo 349.2 Wachovia 341.8 Bank One 277.3 FleetBoston Financial 190.4 U.S. Bancorp 180.0 National City Corp 118.2 SunTrust 117.3 KeyCorp 85.2 Fifth Third Bancorp 80.8 BB&T 80.2 Bank of New York 77.1 PNC Financial 66.3 Asset Size of Banks Dollars in Billions
  5. 5. Los Angeles Mexico City Santiago Buenos Aires Sao Paulo Miami Charlotte Philadelphia New York London Paris Madrid Johannesburg Mumbai Bangkok Singapore Jakarta Kua la Lumpur Sydney Manila Taipei Shanghai Tokyo Seoul Beijing Hong Kong Dubai Cairo Istanbul Milan Hamburg Bogota International Processing Centers Offices Overseas Branches Guayaquil Washington, D.C. Cebu Global Government Banking Guangzhou Frankfurt San Diego Winston- Salem Wachovia International Division A Global Presence
  6. 6. Understanding and Managing Risk <ul><li>Risk Mitigation Begins With Identification and Measurement </li></ul><ul><li>- Credit Risk </li></ul><ul><li>- Liquidity Risk </li></ul><ul><li>- Market Risk </li></ul><ul><li>- Operational Risk </li></ul><ul><li>- Reputational Risk </li></ul><ul><li>- Settlement Risk </li></ul><ul><li>- Sovereign Risk </li></ul>
  7. 7. Understanding and Managing Risk…… <ul><li>Correspondent Bank Infrastructure </li></ul><ul><li>Credit Appetite For Letter of Credit Confirmation </li></ul><ul><li>Deposit Products-USD & Foreign Currency </li></ul><ul><li>FX - Global Netting and Pooling </li></ul><ul><li>Economic Analysis (Wachovia Resources Available to You) </li></ul><ul><li>Lending Services </li></ul>
  8. 8.
  9. 9. Jay Bryson provides analysis on financial markets and macroeconomic developments in foreign economies. Before joining Wachovia, Dr. Bryson was an economist in the Division of International Finance at the Federal Reserve Board in Washington, DC where he monitored and analyzed developments in the foreign exchange market. Expert International Commentary Subscribe via: [email_address]
  10. 10. Trade Finance/Letters of Credit <ul><li>Methods of Payment/Credit Sales </li></ul><ul><li>The Trade Letter of Credit </li></ul><ul><li>Pre-export and Bankers Acceptance Financing </li></ul><ul><li>A Body of Governing Laws and Regulations </li></ul><ul><li>The World of E-Commerce </li></ul>
  11. 11. Comparison of Various Methods of Payment
  12. 12. Export Letter of Credit Issuing and Advising
  13. 13. Export Letters of Credit Presentation
  14. 14. Structured Trade Credit
  15. 15. GOVERNMENT PROGRAMS <ul><li>Export Import Bank of the United States (“EX-IM BANK”) </li></ul><ul><li>Overseas Private Investment Corporation (“OPIC”) </li></ul><ul><li>Commodity Credit Corporation (“CCC”) </li></ul><ul><li>Small Business Administration (“SBA”) </li></ul><ul><li>USAID - Developmental aid via grants, loans and project support </li></ul><ul><li>U.S. Department of Commerce - Trade Advocacy Center </li></ul><ul><li>State Sponsored Trade Promotion Centers </li></ul><ul><li>Multilateral Agencies (World Bank, IMF, IFC, IDB, ADB, EBRD) </li></ul>
  16. 16. U.S. EX-IM BANK <ul><li>Independent Agency of the U.S. Government </li></ul><ul><li>“ Full Faith & Credit” of the U.S. Government </li></ul><ul><li>Promotes Exports of U.S. Goods & Services </li></ul><ul><li>Not an AID or Development Agency </li></ul><ul><li>Requires “Reasonable Assurance of Repayment” </li></ul><ul><li>Does not Compete with U.S. Banks </li></ul>The Export Import Bank of the United States
  17. 17. EX-IM BANK PROGRAMS <ul><li>Short Term Programs (Up to 360 Days) - Most U.S. exports are eligible </li></ul><ul><ul><li>Working Capital Guarantees: 90% guarantees to U.S. banks for export related financing facilities to U.S. exporters </li></ul></ul><ul><ul><li>Export Credit Insurance: 90% risk protection provided to U.S. exporters on their foreign accounts receivables. </li></ul></ul><ul><ul><li>Bank LC Insurance: 95% risk protection provided to banks on their LC confirmation risks. </li></ul></ul><ul><li>Medium/Long Term Programs (Up to 12 years) – U.S. capital goods/services </li></ul><ul><ul><li>Project Finance: Larger projects supported by project cash flows & pre-established off-takes (usually deals of $50 million +) </li></ul></ul><ul><ul><li>Direct Loans: Loans from Ex-Im to a foreign borrower, often government to government (usually deals of $50 million +) </li></ul></ul><ul><ul><li>Guarantees: Guarantees to lenders on loans to buyers of U.S. goods </li></ul></ul><ul><ul><li>Medium Term Insurance : Risk protection to lenders ( < $10 million) </li></ul></ul>
  18. 18. OPIC <ul><li>Independent Agency of the U.S. Government (“Full Faith & Credit”) </li></ul><ul><li>Promotes U.S. Investments Overseas </li></ul><ul><li>Programs: </li></ul><ul><li>Direct Loans/Guarantees - financing the new plant and expansion of U.S. joint ventures or offshore projects with U.S. equity interests </li></ul><ul><li>Political Risk Insurance - coverage of offshore assets of U.S. investors </li></ul><ul><li>Investment Funds - participation in investment funds focused on emerging markets </li></ul><ul><li>SME’s - increased focus on supporting small & medium sized U.S. companies expanding overseas including partnership with SBA and pilot program with Wachovia announced in 2002 </li></ul>Overseas Private Investment Corporation
  19. 19. OPIC Wachovia - SME Pilot Program <ul><li>Program: $100mm Framework Agreement </li></ul><ul><li>Purpose: To support overseas investments of U.S. small and </li></ul><ul><li>medium businesses (sales up to $350 million) </li></ul><ul><li>Borrower: Local Banks or Corporate Borrowers </li></ul><ul><li>Projects: New plant or project development involving eligible U.S. investors in OPIC eligible Countries </li></ul><ul><li>Term: Up to 10 years </li></ul><ul><li>Coverage: For years 1-3: 50% (U.S. Obligor) 75% (Offshore*) </li></ul><ul><li>For years 3-5: 75% (U.S. Obligor) 90% (Offshore*) </li></ul><ul><li>For years 5+: 90% (U.S. Obligor) 90% (Offshore*) </li></ul><ul><li>*100% Currency Inconvertibility </li></ul><ul><li>Loan Size: $100,000 - $15,000,000 </li></ul><ul><li>Spread: Set deal by deal based on underlying project </li></ul>
  20. 20. Commodity Credit Corporation GSM(102/103) Programs <ul><li>Program: U.S. Department of Agriculture Guarantee Program </li></ul><ul><li>Products: Bulk agricultural commodities exported from the U.S. </li></ul><ul><li>Borrower: Local Banks approved by CCC in more than 40 countries around the world. </li></ul><ul><li>Term: GSM-102 Program - LC refinancings to 3 years </li></ul><ul><li>GSM-103 Program - LC refinancings to 10 years </li></ul><ul><li>Coverage: 98% of principal & partial interest protection </li></ul><ul><li>Average Size: $250,000 - $25,000,000 </li></ul><ul><li>Benefits: Lower pricing and longer tenors than would otherwise be </li></ul><ul><li>available in the private markets . </li></ul>
  21. 21. Export Credit Insurance <ul><li>Providers: Specialized insurance offered by Ex-Im & private insurers </li></ul><ul><li>such as AIG, FCIA, EIC, Euler, Coface, NCM, Zurich </li></ul><ul><li>Coverage: Comprehensive coverage for non-payment that is conditioned on insured performance (premium payment, </li></ul><ul><li> valid debt obligations, no product disputes, etc...) </li></ul><ul><li>Uses: Risk Protection on short term foreign a/r’s against bankruptcy, refusal to pay, and/or country events </li></ul><ul><li> Financing/Liquidity </li></ul><ul><ul><ul><ul><ul><li>Qualifying foreign a/r’s for commercial banking collateral </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Bank purchases of insured foreign a/r’s </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Securitization of larger pools of insured foreign a/r’s </li></ul></ul></ul></ul></ul>
  22. 22. Political Risk Insurance <ul><li>Providers: Specialized insurance offered by Ex-Im, OPIC, MIGA and private insurers such as AIG, Chubb, Sovereign, Zurich </li></ul><ul><li>Coverage: Coverage against certain defined country risks such as war, insurrection, terrorism, nationalization, confiscation, currency inconvertibility </li></ul><ul><li>Uses: - Protection of assets located in offshore markets </li></ul><ul><li> - Risk mitigation component in a Project Finance </li></ul><ul><li>structure </li></ul><ul><li>- Piercing “Sovereign Ceiling” in Intl. </li></ul><ul><li>Securitizations </li></ul>
  23. 23. Trade Related Asset Sales <ul><li>LC Discounts: Post negotiation prepayment of LC of the obligations of confirming, accepting or issuing bank. </li></ul><ul><li>Forfaiting: Purchase of promissory notes, drafts, debt instruments Often guaranteed (avaled) by a local bank. </li></ul><ul><li>Typically larger $ size & longer tenors ($1mm+/1 year+). </li></ul><ul><li>Offered by international banks & forfaiting boutiques </li></ul><ul><li>Factoring: Purchase of open account receivables </li></ul><ul><li>U.S./European debtors </li></ul><ul><li>Typically smaller in $ size & shorter tenors </li></ul><ul><li>Offered by specialized factoring companies (CIT, GE,) </li></ul>
  24. 24. Asset-Based Finance <ul><li>Secured Working Capital (inventory and accounts receivable) Credit </li></ul><ul><li>Factoring </li></ul><ul><li>Fixed-Asset Finance and Leasing </li></ul><ul><li>Asset Securitizations </li></ul><ul><li>- Mortgages - Collateral Loan Obligations - Future Flow Transactions </li></ul>
  25. 25. Clean Credit <ul><li>Requires Well-Developed Commercial Laws, Detailed, Accurate and Timely Financial Reporting and Cash Flow-Oriented Lenders </li></ul><ul><li>Typically Not Available in Emerging Markets </li></ul><ul><li>Unsecured Lenders Stand Last in the Queue for Repayment </li></ul><ul><li>Personal Guarantees and the Pledging of Outside Assets May be Required </li></ul>