UK Export Finance (UKEF) has launched its export refinancing facility (ERF) some two years since its announcement.
The scheme, a £5bn guarantee announced by chancellor George Osborne in 2012, has been caught up in red tape awaiting approval and has as yet failed to help a single company.

Designed to boost exports from UK businesses, the facility will “enable UK-based exporters to offer competitive long-term financing to overseas buyers who require loans in excess of £50mn to purchase UK capital goods and services” says a statement issued by the UK government.

It targets project sponsors in emerging markets who need long-term loans to finance investment-related capital goods and services for high-value opportunities such as large-scale construction or infrastructure development projects. Overseas buyers can access the debt capital markets to refinance export finance loans after their initial funding by the banks.

“Under the new facility, UK Export Finance will guarantee repayment of bonds issued by the buyer to refinance the initial loan. This will allow the bonds to be competitively priced at a fixed rate, which takes account of the UK’s credit rating. Should the borrower be unable to refinance the loan, UK Export Finance will become the lender until alternative funding is found,” says the statement.

The facility is expected to help fill a significant gap in UKEF’s product range when compared to competitor export credit agencies. It is the first time this financing approach is being used for civil project finance by an export credit agency.
Jon Coleman, chairman of the British Exporters Association, comments on the launch: “BExA welcomes the launch of the ERF. This will help to ensure the availability of long-term financing to support exports of capital and semi capital goods exports and overseas projects.”

The government’s direct lending facility – also announced by the chancellor in the 2012 budget – was finally opened in November last year when UKEF agreed to lend US$50mn to Alfa Bank of Russia. That facility had also been eagerly awaited by those in the marketplace.