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Expanding the export world

Expanding the export world. International Surety Workshop Rome, May 24th – 25th 2007 EKN, Sweden. What is EKN?. Swedish Export Credit Agency (ECA) Guarantees/Insurances, no loans Independent governmental organisation governed by the Ministry for Foreign Affairs. New Guarantee products.

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Expanding the export world

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  1. Expanding the export world International Surety Workshop Rome, May 24th – 25th 2007 EKN, Sweden

  2. What is EKN? • Swedish Export Credit Agency (ECA) • Guarantees/Insurances, no loans • Independent governmental organisation governed by the Ministry for Foreign Affairs

  3. New Guarantee products • Improved Counter Guarantee • Basic Guarantee, SMEs’ ST export credit risk • Guarantee for Bills of Exchange • Improved Guarantee for Letters of Credit • Working Capital Guarantee • (Export Loan)

  4. The Counter Guarantee - Purpose To provide risk capacity in order to increase Swedish exporters’ guarantee limits with banks Export promotion, especially for SMEs • Contract guarantee (security/bond) issued by bank or insurance company • On behalf of Swedish exporter • Beneficiary the foreign buyer in an export transaction

  5. Counter Guarantee - Structure Exporter Exportcontract - Buyer - Beneficiary Recourse Issuer Contract guarantee • Bid Guarantee • Advance Payment Guarantee • Progress Payment Guarantee • Retention Payment Guarantee • Performance Guarantee • Warranty Guarantee Counter Guarantee 75 % Recourse EKN

  6. Securities • General / Specific • Pro rata risk sharing • Discussions with the banks; case by case

  7. The Counter Guarantee - Extent • 75 % of the issuer’s loss incurred by calling of the contract guarantee, irrespective of reason (fair/unfair) • Full recourse on the exporter • Conditional or On demand, also Stand by L/C • Flexibility: - Pre-approved limit - Premium payment adjusted to the payment charged by the issuer

  8. Pre-approved limit • Limit (exposure on one exporter) for counter guarantees for one year – To exporter • Can also cover ”old” contract guarantees, to free limits with banks in connection with new issuing • However, environmental assessment of the export transaction may be necessary on a case by case basis

  9. Pricing of the Counter Guarantee • Bank’s price • Risk sharing proportion • Generally priced at 0,5 – 2,00 % p a on guaranteed amount • Payment follows the contract guarantee, normally quarterly in advance, discount if flat upfront

  10. Information needed • The export transaction • Credit report and annual accounts on the exporter • Bank’s exposure and collateral • Bank’s risk assessment • Bank’s pricing indication • (Cash flow and business plan)

  11. Counter Guarantee Indemnification: • 75 % of what the issuer has paid to the beneficiary • EKN indemnifies within 30 days from request but pays interest from day one • Issuer can collect the 25 % directly from the exporter • EKN has direct recourse on the exporter after indemnification • SEK, USD, EUR, CHF, JPY

  12. Counter Guarantee - Trend

  13. Change in demand • Increased risk awareness and need for risk cover for larger contracts • Increased awareness of EKN’s counter guarantee • Improved counter guarantee product • More flexibility • More ”user friendly” general terms and conditions

  14. Experience • No claims • Mostly SMEs • Constructions contracts dominate (small) • Guarantee amounts mostly around EUR 150 000 • 8 pre-approved limits amounted to MEUR 563 • Very few add a Guarantee for Unfair Calling

  15. www.ekn.se Susanne With, +46 8 788 00 26 susanne.with@ekn.se Lotta Danielsson, +46 8 788 00 73 lotta.danielsson@ekn.se

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