Structured trade finance ex im working capital guarantee programme - eugene nagatko, bank of america - 25 january 2012
Export-Import Bank Working Capital Guarantee Program Structured Trade Finance Global Trade & Supply Chain SolutionsEugene NagotkoDirectorOffice: (201) 251-5075Cell: (201) 403-3427Gene.Nagotko@BAML.com
Ex-Im Bank Working Capital Guarantee Program Overview Definition – Working Capital (AR/Inventory) financing for exporters backed by the guarantee of the Export-Import Bank of the United States, an agency that carries the full faith and credit backing of our government Purpose – To support financing of export of U.S. goods and services to international markets and maintain and expand U.S. jobs • Insures lenders from losses on foreign receivables • Offers superior advance rates against working capital to exporters (up to 90% on A/R and 75% on inventory) Program – BofAML finds appropriate clients/prospects, proposes the solution, and performs standard due diligence – BofAML has Super level Delegated Authority status ($10mm) and is an approved Fast Track lender ($25mm) – WCGP facilities are frequently paired with domestic facilities for comprehensive trade financing solutions. • Enables leveraging of customer service and compliance • Cross-collateralized and cross-defaulted with domestic facilities, shared financial covenants – Performance Stand-by Letters of Credit issued under the WCGP only require 25% Borrowing Base collateral support Pricing – 1.0% to 1.5% upfront fees per annum with LIBOR plus matrix pricing spreads – BofAML risk policy provides strategic pricing of WCGP facilities due to the Ex-Im Bank guarantee
Benefits of Ex-Im Bank WCGP Financing Advantages to Borrower Bank of America Merrill Lynch Advantages Superior advance rates vs. non-guaranteed LOC: Delegated Lending Authority provides flexibility 90% for eligible US export-related foreign A/R Up to $25 million without special approval 70% Overseas export-related foreign A/R Opportunity to lend against challenging circumstances 75% for eligible US export-related inventory Difficult asset classes 60% Overseas export-related inventory Concentrated customer bases Raw Materials & Work-In-Process included Lumpy cash flows due to project type transactions Concentration Risk is not a limitation with Ex-Im Bank Well rounded sales and support structure adds to ease of use. Enables exporter to offer longer and more flexible sales terms to buyers: Dedicated sales team provides superior product origination support to our client borrowers Up to 180 days from date of invoice, plus Well established System of Record, maintained by an operations 60 days past due for open A/R team with WCGP product-specific knowledge 90 days past due if covered by credit insurance BofAML employs external counsel with extensive WCGP product expertise Broadens ability to finance export growth Alternative structures are available under the WCG Program to support various business models Indirect exports qualify (i.e. a direct contract with the foreign end-user is not required) BofAML Lines of Credit shorten the time line for daily funding needs for most clients
Ex-Im Bank WCGP Financing: Basic Eligibility Criteria Client Profile: • U.S. exporters: manufacturers and services related companies • U.S. companies and U.S. subsidiaries of foreign companies are eligible • Industry sectors – chemicals, transportation, alternative fuels, electrical/testing, oil & gas • BofAML is a market leader with a global network and treasury platform Borrower characteristics: • Positive TNW and one year operating history • Demonstrated experience in delivering similar contracts successfully • Eligible collateral consists of export related A/R and inventory • Goods and/or services must include more than 50% U.S. content • Goods and/or services must be exported from the U.S. • Perfected first security interest in the collateral must be available Credit underwriting considerations: • The usual standards are applied under our delegated authority. • In addition, an RMA ratio qualification test is applied: • Borrower must exceed 4 of 7 ratios as reported by the RMA for the lower quartile of the borrower’s NAICS classification.
Global Trade & Supply Chain SolutionsA leader in the $2.5 Billion Ex-Im Bank Working Capital Guarantee ProgramHelping clients maximize cash flow through liquidity enhancements, foreign riskmitigation and expansion into new developing markets. Competitive Positioning Demonstrated Market Leadership Leader in North American export trade finance market with client Best Trade Bank In North America - 2010 base in the US Middle Market and Business Banking - Trade & Forfaiting Review - Readers Poll Top ranked market share in the Ex-Im Bank Working Capital Guarantee Program Best Financial Supply Chain, North America 2008, 2009, 2010 - Treasury Management International 15 new clients in past year with ABL infrastructure and systems to support future growth Best Trade Finance Provider in the USA - 2011 Highest Ex-Im Bank lending authority allowing export working - Euromoney Trade Finance Poll 2011 capital loans of up to $25MM per borrower with 90% guarantee BofAML / Ex-Im Working Capital Guarantee Program sample transactions (names / logos omitted) Georgia based North Carolina Louisiana based New Jersey based Michigan based renewable fuel based manufacturer producer of specialty provider of electric architecture and producer of extrusion and chemicals supplies to energy and engineering sheet stretch forming other industries organization machines $12MM Term Loan $4MM Ex-Im $5MM Term Loan $10MM Revolver $4MM Revolver $3MM Ex-Im $17MM Revolver $25MM Ex-Im $7MM Ex-Im $6MM Ex-Im Proprietary & Confidential - For internal use only
Ex-Im Working Capital Deal Process Overview No. Description 1 Evaluate the Need: Review operating and export history; Product - its nature, US content, and countries of export; Ownership evaluation; and RMA ratio qualification 2 Assess Program Suitability: Waiver need evaluation, Formal Risk Approval, Term Sheet construction and acceptance 3 Perform Due Diligence: Field Exam, Legal documentation process 4 On-board and Acclimate the Client: Orientation with borrowing procedures, Stucky (ABL system of record) utilization and functionality, Treasury account establishment, as applicable 5 Close the Deal: Formal closing (signing) of loan documents, Fee payment, Notification to Ex-Im6
Ex-Im Qualifying Ratios (as defined by the Risk Management Association): Current Ratio Prospective borrower ratios are compared to Net Sales/Total Assets NAICS industry data as published Debt to Tangible Worth from time to time in the RMA Statement Studies Debt to Service Coverage EBIT/Interest Cost of Sales/Inventory Turn (days) Sales/Accounts Receivable Turn (days)8
BofAML contacts for the Ex-Im Bank WCGP- Southeast MM Product Partner- Exim Bank WCGP Trade Sales Officer Eugene S. Nagotko Julia Reynolds Director Director Bank of America Merrill Lynch Bank of America Plaza 208 Harristown Road 414 Union Street Glen Rock, NJ 07452 Nashville, TN 37219-1697 Mail code: NJ6-503-03-11 Mail code: TN1-100-06-25 Office 201.251.5075 Office 615.749.3455 Cell 201.403.3427 firstname.lastname@example.org Julia.email@example.com
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