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The Export-Import Bank of the United States (US Exim) has passed a series of emergency coronavirus measures in a bid to “inject liquidity into the market” and help US companies trading internationally.

Like companies across the globe, US exporters and importers have been affected by the severe disruption to global supply chains.

The past few weeks has seen a rapid acceleration in efforts by governments the world over to stem the spread of the virus, with measures that were first enforced in China – where the disease originated – being mimicked globally.

People have been told to stay at home and keep their workplaces shut, meanwhile restrictions have been put on the flow of goods, people and capital.

In a bid to minimise any negative economic effects caused by these measures, governments, development finance institutions and commercial banks have in turn announced various support packages.

In the US, Congress passed a US$2tn aid bill last month, which included US$350bn in loans to small businesses, as well as a US$500bn fund to help companies more broadly.

Speaking to GTR about the need for the bank’s new measures, US Exim’s chief banking officer Stephen Renna says: “There is immediate liquidity stress out there because the demand side of the economy is shut down. It’s not like it was in 2008, where you had a demand side of the economy functioning, but you had no liquidity from the financial sector to be able to fulfil that demand. Now we have it reversed.”

He adds: “Our existing clients can’t make payments, essentially because they’re not having any revenue coming in.”

Last week, the bank announced it will amend the fee structure of its Delegated Authority (DA) loans and Fast Track Loans to help small businesses get access to funding. It says it will reduce fee rates by an average of 10 basis points, while also giving firms “better transparency into the fee structure”.

DA lenders are financial institutions dotted across the United States that are allowed to approve US Exim-backed loans.

US Exim says that the changes will be phased in over the next month, fully taking effect at the start of May, with the bank commenting that “the change is applicable to all DA and Fast Track Loans whose effective date is April 1, 2020, and thereafter”.

US Exim adds: “Non-DA loans and deals approved by the Board of Directors will remain under the old fee structure at the present time.”

 

Temporary relief measures

Towards the end of March, US Exim unveiled a string of temporary relief measures, which included creating an entirely new bridge financing programme.

US Exim says that because of Covid-19, foreign purchasers are “having difficulty obtaining financing from the commercial markets” and “are expected to need several billion dollars in temporary, short-term bridge financing to enable them to acquire US goods and services”.

Renna notes: “We’re not a bridge financing entity typically, we don’t usually provide that type of financing. But in this interim period of disruption caused by Covid-19, you’ve got this sudden and very material retrenchment of private lending market from the marketplace.”

“We want buyers to know, if you have demand for product from a US exporter, we have this bridge financing capability that we can provide to literally bridge you between now – your immediate needs – and when the markets normalise again and private capital lenders can return,” he adds.

US Exim has also made amendments to three existing programmes as part of its temporary relief measures for American companies, with the changes put in place for the next year at least.

It has temporarily expanded its pre-export payment policy, which has traditionally been used to support US exports of long-lead manufactured products such as satellites and large turbines.

US Exim says that American manufacturers are already facing a liquidity crisis, commenting: “Many manufacturers will not be able to get the required pre-export payments from foreign buyers to complete manufacturing. Nor will they be able to convert their finished products into cash because of the inability to deliver the finished product to the foreign customer.”

The new pre-delivery/pre-export financing programme has been amended to include transactions in which US Exim is not providing the long-term financing to the foreign buyer.

US Exim says this “will assist in instances where a commercial lender may be willing to finance a finished product but would be unwilling to [finance] pre-export payments during the manufacturing period”.

The export-import bank has also made changes to its supply chain financing guarantee programme.

Created by US Exim in 2010, the programme has been “seldom used” up until now, US Exim says, as banks previously had more private sector options with less “restrictive terms”.

US Exim’s SCF programme has traditionally had a target stating that 50% of the suppliers accessing the scheme must be small businesses, but this will be temporarily waived under the new initiative.

Meanwhile, it has also made changes to its working capital guarantee programme (WCGP) which “facilitates loans from commercial lenders to creditworthy US businesses that export over the term of the loan”.

Running since the 1980s, the WCGP currently has 49 active DA lenders, and has now been made “more flexible for borrowers”.

Amendments include temporarily expanding the definition of eligible inventory from only export-related inventory to all inventory that could potentially be exported.

US Exim says: “This will expand the borrowing availability for US exporters that use an Exim-guaranteed loan facility. The exporter will make a representation on the monthly borrowing base certificate provided to the lender that the inventory they are borrowing against could be exported. This will also be verified by periodic field audits that are conducted as part of program compliance.”

One exporter that is considering tapping into US Exim’s new support measures is Texas-based exporter EquipXP, which specialises in the sale, finance and transport of new and used heavy equipment to emerging markets, predominantly Africa and South America.

CEO Vernon Darko tells GTR that his firm is already feeling the effects of coronavirus: “I have a couple of contracts that have been put on hold in Africa, and with all the countries we work in all being under lockdown, there is very limited movement.”

He adds: “Business has definitely slowed down and I’m sure down the line we’re going to feel it. We are working on a few transactions which will close out next month. But after that we have to figure it all out.”