Export Finance, Guarantees & Credit Insurance – Practical Guide to International Trade Risk Mitigation

Snapshot of course content

• The importance of export finance today
  • Conflicting requirements of exporter and overseas buyer
  • The nature and implications of export credit
  • Key benefits of export finance to banks and corporates
  • Export finance – an alternative to balance sheet lending
• Identifying and managing export risk
  • Political risk events; country decision, moratorium, delay in funds transfer, place of payment, payment in local currency and force majeure
  • Commercial risk events; insolvency, default, contract cancellation, goods rejection and dispute
  • Performance risk; commercial contract, insurance policy compliance
  • The importance of the commercial contract and Incoterms
  • The nature of documentation risk
  • Compliance; anti-money laundering and sanctions
  • Reputational risk considerations
  • Case study: Interactive consideration of contractual terms and needs of exporter and overseas buyer
• Gathering information & proposition assessment
  • Understanding the needs of the customer
  • Proposition assessment; gathering and evaluating key information
  • Constructing the trade cycle timeline
  • Exercise: Simulated interview with an exporter who requires export finance
• Controlling goods and the receivable
  • The important role of trade documentation
  • Documents of title and delivery orders
  • The nature of the receivable; bills of exchange, promissory note and sales invoice
  • Risk and control implications
• Export documentary credits
  • Description, parties, and operation
  • Sight, term, negotiation and deferred payment credits
  • Unconfirmed and confirmed credits, silent confirmation and commitments to negotiate
  • Retaining control and the fundamentals of getting paid
  • Financing; discounting, negotiating and advancing funds (with and without recourse)
  • Documentary risk; the implications of discrepant documents
  • The role of UCP 600, ISBP 745 and URR 725
  • Case study: Risk evaluation and structuring of a letter of credit pre-shipment finance facility
• Export documentary collections
  • Description, parties, and operation
  • Risk and control features
  • Advance against collections
  • Bill discounting – the value of avalized bills
  • The role of URC 522
• The forfaiting market
  • Description, parties and operation
  • Primary and secondary market purchase
  • Benefits of forfaiting; without recourse finance and secondary market distribution
  • Risk evaluation and due diligence
  • An appreciation of URF 800
  • Case study: Risk assessment prior to purchasing an avalized bill of exchange
• Export factoring and invoice discounting
  • Description, parties, and operation
  • Invoice discounting versus full-service factoring
  • Use of factoring in export finance
• Bonds & Guarantees
  • Description, parties, and operation
  • Types; bid bonds, advance payment guarantees, performance and retention bonds
  • The nature and risk of on-demand guarantees
  • Counter-indemnification and facility requirements
  • Legal jurisdiction and expiry date issues
  • An appreciation of URDG 758
• The use of standby letters of credit
• Short-term export credit insurance
  • Financing with credit insurance support
  • Risk appreciation; indemnification, insured events, exclusions and policy performance
  • Joint insured Vs. loss payee status
  • Case study: Structuring an insured receivables finance facility
• The role of export credit agencies (ECAs)
  • Background, role, and status
  • Financing and mitigating risk with ECA support
  • Characteristics; short and medium to long-term export credits
  • Parties; exporter, buyer (sovereign, public & private entity) and bank
  • Benefits; to the exporter, financing bank and to the overseas buyer
  • Eligibility
  • The OECD Arrangement (Consensus) on Officially Supported Export Credits
  • Members
  • Regulation of ECA cover for medium to long-term export credit
  • Foreign content
  • Minimum premium rates
  • Starting point of credit
  • Maximum term of credit period
  • Minimum cash down payment
  • Installment repayments
  • Other EU restrictions; short-term marketable risk
  • ECA non-participants to the OECD arrangement
• Supplier credit
  • Description, parties, and operation
  • Types; short and medium to long-term
  • Risk mitigation; parameters of cover
  • Bank financing involvement
  • Standard terms of ECA cover
  • Complex transactions; multiple exporters, sub-suppliers, subsidiaries and intermediaries
  • Case study: Supplier credit transaction; appreciation of risk evaluation, ECA structure, and benefits
• Buyer credit
  • Description, parties, and operation
  • Key differences in supplier credit
  • Risk mitigation; parameters of cover
  • Disbursement
  • Standard terms of ECA cover
  • Complex transactions; bank to bank loans, multiple lenders, syndication and sub-participation
  • Case study: Buyer credit transaction; appreciation of risk evaluation, ECA structure, and benefits
• ECA direct loans to the buyer
  • Description, parties, and operation
  • Key differences to buyer credit
  • Regulations
  • Typical loan covenants
  • Interest rates (and the use of CIRRs)
• Other types of ECA cover
  • Pre-shipment
  • Partial guarantees to lenders
  • Lines of credit; general purpose and project specific
  • Bond support
  • Case study: Formulation of a bonding and finance facility for a manufacturer
  • Letter of credit confirmation support
  • Credit insurance
  • Bond insurance
• ECAs around the world
  • Key differences in status, operation and support
• Export finance facility structuring
  • Calculating the facility requirement
  • The concept of “follow the goods – follow the money”
  • Transactional security; goods and receivable
  • The use of third-party credit enhancement techniques
  • Constructing a self-liquidating facility aligned to the trade cycle
  • Retaining control and the reality of realizing security
  • Case study: Identification of the right solution(s) and structure for a multi receivables requirement
• Course summary and close