The Export-Import Bank of the United States (US Ex-Im) has implemented a “take out” option to reduce banks’ liquidity risks and enhance US export competitiveness. Commercial banks can now sell their US Ex-Im -guaranteed medium and long-term loans back to the bank.
“The US Ex-Im ‘take-out’ option will enable banks to offer much more competitive financing terms to their borrowers who wish to buy US exports,” says John McAdams, US Ex-Im senior vice-president – export finance.
By purchasing the take-out option liquidity insurance, banks will be able to sell the guaranteed loans to US Ex-Im at par if there are significant changes in their credit spreads and funding costs, or in the overall market.
Since the onset of the financial crisis, many banks that have frequently used US Ex-Im products have experienced increased funding and liquidity costs for trade finance transactions, resulting in higher pricing and causing many borrowers to turn, instead, to US Ex-Im’s direct loan programme.
“We do not want the rise in direct loan requests to cause commercial banks to stop offering US Ex-Im’s products in conjunction with their financing,” McAdams says.
“While US Ex-Im direct loans have always been available, we want to maintain commercial bank participation in our programmes. The banks are an important source of origination and administration of our transactions.”
If a guaranteed lender exercises the take-out option, US Ex-Im will buy, and the guaranteed lender will transfer to US Ex-Im any loans covered by a take-out option and all related transaction documents in exchange for payment of the loan purchase price. US Ex-Im will charge a modest annual fee to the lender for this option, and an additional fee if the option is exercised. The option is available for all new dollar-denominated, floating rate, medium and long-term US Ex-Im-guaranteed loans.
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