Canadian export credit agency Export Development Canada (EDC) has closed an agreement with MBIA Insurance Corporation to insure a US$1bn portion of its aerospace loan portfolio exposure.

The move reduces the amount of capital that EDC is required to set aside for potential losses on this portion of the portfolio, enabling EDC to take on additional exposure in aerospace or other sectors.

“Freeing up this capital allows us to consider a wider range of opportunities in key markets where Canadian exporters are experiencing significant growth, and where our products and services are most needed,” says Rob Wright, president and chief executive officer of EDC. “This innovative approach to risk management is an excellent example of how EDC is evolving our business to meet the needs of our customers.”

The agreement provides EDC with protection in the event of lessee defaults, which has the effect of locking in future revenues on the US$1bn portion of EDC’s aerospace loan portfolio. The policy helps to address concentration issues that have resulted from EDC’s role as a significant provider of finance to the North American regional airline industry in support of sales by the Canadian aerospace sector.

The financial guarantee insurance policy with MBIA was structured and arranged by Orbis Capital, financial adviser to EDC in relation to this agreement. MBIA Insurance is based in the US and is rated AAA by Moody’s , S&P and Fitch.

Orbis Capital is a specialist financial advisory firm based in London, UK.