New Zealand's ECA to launch new products

The New Zealand Export Credit Office (NZECO) is due to launch two new products before the end of April. It is introducing a broader contract bond guarantee and a targeted short-term working capital guarantee.

The contract bond guarantee is available for export transactions where the exporter must provide a bond in favour of the buyer. NZECO does not issue the bond itself but will guarantee the performance of the exporter to the bond issuer. The guarantee provides 100% indemnity for up to 100% of the bond value, and supports a specific export contract rather than a facility. In some cases, NZECO may risk share with the bank or bond provider.

As a condition of cover, NZECO will also draw up a separate agreement with the exporter that provides NZECO with the right to seek recourse, as well as provide the exporter with unfair calling of the bond insurance.

This product aims to help exporters when the exporter's bank is not prepared to issue the bond due to the exporter's lack of sufficient security for the bond; or when the buyer requires the bond to be provided by a bond provider and the exporting company doesn 't have any track record with the bond provider; and the export contract to which the bond relates contains at least 30% New Zealand value added content.

The contract bond guarantee will cover bid bonds, advance payment bonds, performance bonds, labour and material payment bonds, warranty/maintenance bonds, and retention bonds.

It aims to help exporters secure particularly large or unexpected orders with overseas buyers, as well as free up the exporter’s working capital.

The second product is the short-term working capital guarantee, aimed at medium-sized exporters to provide additional funding to support business growth.

Eligibility requirements for this product include having a sales turnover of up to US$50mn, and that the goods or services being exported must have at least a 30% value-add in New Zealand. The company also has to have been exporting for a minimum of two years and have an existing banking relationship.