Erste Group Bank Workshop: Structured Trade Finance in CEE

Transcription

1 Erste Group Bank Workshop: Structured Trade Finance in CEE

2 Structured Trade Finance in CEE: Topics to be covered What is Structured Trade Finance Is Structured Trade Finance applicable for the markets in CEE Recent Examples Erste Group s Structured Trade Finance Capability 2

3 Erste Group As a retail and corporate bank, Erste Group is market leader in the Eastern part of the EU. It is one of the largest financial services providers in Central and Eastern Europe (CEE) in terms of clients and total assets. Around 49,500 employees serve 17 million customers in 3,100 branches in 8 countries (Austria, Czech Republic, Slovakia, Romania, Hungary, Croatia, Serbia, Ukraine). 3

4 Structured Trade Finance: Definition Structured Trade Finance: the design of structured working capital financing solutions based on and secured by the cash flows generated by the production and sale of goods 4

5 Structured Trade Finance: Is Structured Trade Finance applicable for CEE? 5

6 Structured Trade Finance: Benefits for the Client Provides a secure source of working capital Access to funding outside of normal bank lines provided by local banks Offers the possibility of medium term funding Lower cost of funding compared to local debt Able to use unencumbered export sales as security for loan Establishes a track-record of borrowing from foreign banks 6

7 Structured Trade Finance: Disadvantages for the Client Need for bank to undertake extensive due diligence Takes time to complete Complex documentation Legal and other expenses have to be paid by the client Need for on-going compliance with loan covenants 7

8 Structured Trade Finance: Benefits for the Lender STF is a relationship product which creates cross-selling opportunities Enhances credit risk of a transaction by converting credit risk into performance risk Broadens the product range that can be offered to clients (existing lines may be constrained by lack of local security) Broadens target market to 2nd tier corporates Client retention Income generation Ancillary business Close on-going monitoring of the facility 8

9 Structured Trade Finance: Choice of Financing Structures Jurisdiction Customers requirements Pricing Underlying commercial transaction Risk mitigation Restrictions under existing loans Currency control regulations 9

10 Structured Trade Finance: Types of Financing Structures Pre-export Finance Prepayment Financing Tolling Finance Borrowing Base Warehouse Financing Inventory Financing via a Special Purpose Company 10

11 Pre-export Financing Loan Lender Producer/ Borrower Collection Account Repayment Purchase Price Goods End-Buyer 11

12 Pre-export Financing 2. Credit Order: Guarantee: Assignment of Purchase Contract, Contract of Insurance, Sales Contracts: Pledge of Off-taker Account 1. Loan Agreement 2. Purchase Contract Lender Borrower Off-taker 6. Payment of interest & principal 2. Assignment of Purchase Contract: Pledge of Borrower Account 9. Surplus funds released to Borrower 7. Surplus funds released to Off-taker 3. Product 4. Product 2. Sales Contracts Borrower Account End-Buyers at EGB Vienna 8. Amounts due under Purchase Contract Off-taker Account at EGB Vienna 5. Payments due under Sales Contracts 12

13 Prepayment Financing Export Contract Producer Prepayment Goods Offtaker/ Borrower Loan Repayment Goods Purchase Price Lender End-Buyer 13

14 Tolling Financing Onshore Offshore Suppliers Payment Raw Materials Off-taker/ Borrower Loan Toller Tolling Contract Goods Raw Materials Goods Purchase Price Repayment Lender End-Buyer 14

15 Borrowing Base Financing 3. Guarantee, Assignment of Credit Insurance Guarantor 3. Credit Insurance Credit Insurer 4. Facility Agent designated as Loss Payee 1. Loan Agreement 6. Product EGB 2. Assignment of receivables, guarantees, pledge of current accounts Borrower 8. Funds released to Borrowers Sales Contract 7. Payment of Assigned Receivables End Buyers 5. Disbursements Borrower s Current 8. Release of funds Collection Account Accounts at EGB Vienna 9. Payment of interest & principal 15

16 Inventory Financing via a SPC Sales & Purchase Contract Producer Prepayment Product Loan agreement Management Agreement Lender Advances SPC Purchase Contract Client Debt Service Deferred Payment 16

17 Structured Trade Finance: Erste Group STF Capability STF team based in London operates as the centre of expertise for Erste Group in providing structured working capital facilities for corporates One of the six centres of competence which together form the Transaction Banking Division of Erste Group, the others being: Cash Management, Trade & Export Finance, Supply Chain Finance, Factoring and Financial Institutions STF team has extensive expertise across a diverse range of industry sectors and markets. Offers a full service capability in the origination, structuring and execution of STF facilities from initial negotiation to booking, final disbursement and on-going monitoring Corporates in the region enjoy the benefit of highly developed, tailor-made structured working capital facilities managed in London but delivered through local relationship managers. 17

18 Structured Trade Finance: Target Markets, Industry Sectors & Clients Focus is on the origination of STF transactions in Erste Group s core markets Other markets where transactions may be considered on an opportunistic basis Target clients must be significant industry players in their own industry sector. Clients range from producers, processors, trading companies and end users. Given a normal minimum economic transaction size of EUR20mn target companies should have turnovers in excess of EUR100mn. Bilateral facilities would not normally be for amounts greater than EUR50mn. Final holds in club or syndicated transactions would not normally be for amounts greater than EUR50mn Core Markets Austria Germany Serbia Romania Slovakia Croatia Poland Ukraine Czech Republic Hungary Target industry Sectors Metals & Mining Agriculture Chemicals Oil & Gas Forestry Manufacturing Trading Metal Processing Forestry Manufacturing Transportation 18

19 Contact Details David Taylor Director, Structured Trade Finance Erste Group Bank AG 68 Cornhill London EC3V 3QE Tel +44 (0) Mob +44 (0)