EXPORT FINANCING AND RISK UNDERTAKING EXPORT FINANCING AND RISK UNDERTAKING SOLUTIONS FROM EXIM HUNGARYSOLUTIONS FROM EXIM HUNGARY

GÁBOR SZŐCS, DIRECTORGÁBOR SZŐCS, DIRECTORVIKTOR BERKI, DIRECTORVIKTOR BERKI, DIRECTOR

14 May, 2015 Kiev

IINTERGRATEDNTERGRATED SYSTEM TO SUPPORT SYSTEM TO SUPPORT FOREIGN TRADE AND ECONOMYFOREIGN TRADE AND ECONOMY

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OWNED BY THE MINISTRY OF FOREIGN AFFAIRS AND TRADE

20 YEARS IN SERVICE OF HUNGARIAN EXPORTERS

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OPERATION WITHIN AN INTEGRATED OPERATION WITHIN AN INTEGRATED ORGANISATIONORGANISATION

the scope of activities is split between Eximbank and MEHIB;

within an integrated framework

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EXIM OVERVIEWEXIM OVERVIEW

• Specialised credit institution / export credit insurance company • Set up by acts of parliament in 1994 • EXIM has to comply with guidelines and directives of: WTO OECD and the

EU• Wholly owned by the government of Hungary with ownership rights

exercised through the Ministry of Foreign Affairs and Trade

MISSION

EXIM IS AN INSTRUMENT OF ECONOMIC POLICY IN SUPPORT OF HUNGARIAN EXPORTS

• Financing and undertaking risks not covered by commercial banks and/or private insurance companies;

• to enable Hungarian companies – whether small or large – to take their export opportunities by assisting in financing the export of Hungarian goods and services

KEYKEY FIGURESFIGURES

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EXIM’S MAIN SEXIM’S MAIN STRATEGYTRATEGY

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Exports and imports of goods and services EUR M

1116.31366.2 1511.9 1479.0 1484.2

344.4 426.0 412.5530.9 488.3

0.0200.0400.0600.0800.0

1000.01200.01400.01600.0

2010 2011 2012 2013 2014Export Import

HUNGARIAN EXPORT SECTORHUNGARIAN EXPORT SECTOR

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Overview of Hungarian exportation Hungary’s top export partners (2014)Rank Countries Export (HUF bn) Share (%)

1 Germany 25,506 26.2%2 Austria 5,782 5.9%

3 Romania 5,157 5.3%

4 Slovakia 4,570 4.7%

5 Italy 4,419 4.5%

6 France 4,186 4.3%

7 UK 3,975 4.1%

8 USA 3,809 3.9%

9 Poland 3,630 3.7%

10 Czech 3,506 3.6%

11 Netherlands 2,988 3.0%

12 Spain 2,530 2.6%

13 Russia 2,285 2.3%

14 Ukraine 1,196 2.0%

15 Belgium 1,728 1.7%

16 China 1,666 1.7%

17 Turkey 1,631 1.6%

18 Serbia 1,484 1.5%

Others 16,249 16.7%Total 97,079 100.0%

• 85% of Hungary’s exports are concentrated within Europe, with Germany (26.2%), Austria (5.9%), Romania (5.3%), Slovakia (4.7%), Italy (4.5%), France (4.3%), and the United Kingdom (4.1%) representing the largest shares

• Outside of Europe, Hungary’s largest export trading partners are the United States (3.9%), Russian Federation (2.3%), Ukraine (2.0%), and China (1.7%)

• Many of these Hungarian export companies are small and medium-sized enterprises (SMEs) with limited access to credit and liquidity due to the financial/banking crisis

EXPORT RELATIONSEXPORT RELATIONS

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OVERVIEW OF EXIM PRODUCTS AND PORTFOLIOOVERVIEW OF EXIM PRODUCTS AND PORTFOLIO

FINANCINGFINANCING PRODUCTSPRODUCTS

PROCUREMENTPROCUREMENT DeliveryDelivery INCOME REALIZATION

INVESTMENT CREDIT – FOR FOREIGN INVESTMENTSCAPITAL ASSET

INVESTMENT CREDIT FOR EXPORT

DIRECT EXPORT PRE-FINANCING

REFINANCING FOR PRE-FINANCING

BUYER CREDIT FACILITIES

FORFAITING, SHORT-TERM PURCHASE OF

RECEIVABLES

REFINANCING FOR POST-FINANCING

EXPORT PRE-FINANCINGINVESTMENT FINANCING

EXPORT POST-FINANCING

SUPPLY CHAIN FINANCING

REFINANCING FOR LEASING AND INVESTMENT

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PRODUCTION DELIVERYINVESTMENT

RISK UNDERTAKING PRODUCTS RISK UNDERTAKING PRODUCTS (INSURANCE)(INSURANCE)

LOAN GUARANTEE

SUPPLIER CREDIT INSURANCE (S)

EXPORT RECEIVABLES INSURANCE (C)

INVESTMENT INSURANCE (B)

MANUFACTURING RISK INSURANCE (G)

termeléstermelés kiszállításkiszállításbefektetés, beruházásbefektetés, beruházás árbevétel realizálásárbevétel realizálás

NON-SHAREHOLDER’S LOAN INSURANCE (BH)

BUYER CREDIT INSURANCE (V)

SUPPLIER CREDIT DISCOUNTING

INSURANCE (KV)FACTORING INSURANCE

(CF)

EXPORT L/C CONFIRMATION INSURANCE (AI)

COMMERCIAL GUARANTESS

PROCUREMENT PRODUCTION DELIVERYINVESTMENT INCOME REALIZATION

EXPORT PRE-FINANCINGINVESTMENT FINANCING

EXPORT POST-FINANCING

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• To promote increased domestic supply production that in turn generates additional export revenue for the investing entity.

• Tenor: 2-15 years

• The facility is available for capacity improvements, refurbishment and modernization. Manufacturing equipment, heavy machinery, production lines, fixed assets, commercial property purchase, building and remodeling (up to a maximum of 50% of loan amount).

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INVESTMENT LOANINVESTMENT LOAN

EXPORT EXPORT BOOSTING BOOSTING CREDIT PROGRAM CREDIT PROGRAM (EHP)(EHP)

INDIRECT EXPORT PRE-FINANCING CREDIT

- UP TO 2 YEARS

INDIRECT EXPORT POST-FINANCING

CREDIT

REFINANCING FOR EXPORT PROJECT

FINANCINGLEASING REFINANCING CREDIT FACILITY FOR

EXPORT

INDIRECT EXPORT PRE-FINANCING CREDIT

- 2-5 YEARS

FACTORING REFINANCING CREDIT FACILITY FOR EXPORT

FACTORING INSURANCE(CF)

BUYER CREDIT INSURANCE(V)

EXPORT L/C CONFIRMATION INSURANCE (AI)

SUPPLIER CREDIT DISCOUNTING INSURANCE

(FACILITY KV)

NON-SHAREHOLDER’S LOAN INSURANCE (BH)

INCOME REALIZATION

EXPORT PRE-FINANCINGINVESTMENT FINANCING

EXPORT POST-FINANCING

PROCUREMENT PRODUCTION DELIVERYINVESTMENT

Through banks, credit institutions

LOAN GUARANTEE PROGRAM

PARTNER CREDIT ISTITUTIONSPARTNER CREDIT ISTITUTIONS

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• Facilitating the performance and delivery of goods and services from the preparatory and production phases through inventory buildup and the receipt of the export sales revenue as stipulated by the commercial contract.

• Up to 85% of the commercial contract or supplier contract

• Fixed CIRR, 2-5 years

• amortized in 3 or 6 months installments

EXPORT PRE-FINANCINGEXPORT PRE-FINANCING

• For domestic suppliers with existing supplier agreements with a Hungarian exporter

• Up to 85% of the net contract value – excluding value added taxes – of the submitted, executed supplier agreement is eligible for financing

• Benefits of direct financing for the supplier

• Financing is available for the entire production and sales cycle

• Fixed CIRR, 2-5 years

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SUPPLY CHAIN FINANCINGSUPPLY CHAIN FINANCING

• The classic buyer’s credit facility has been applied is order to finance the purchases of goods and/or services supplied under a commercial contract concluded between the Hungarian exporter and a foreign buyer, and is typically secured by MEHIB insurance policy (type V)

• Typically 2-5 years (maximum 10) years, fixed CIRR

• Maximum of 85% of the foreign trade/general contracting agreement may be financed. A minimum 15% advance must be paid by the buyer at the start of performance. Local costs may be financed in part.

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BUYERS CREDITBUYERS CREDIT

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• Covers exporters’ risks connected to their short-term, typically unsecured and open account transactions with deferred payment to non-marketable countries.

• covers against losses caused by the buyer’s economic situation andcountry risks beyond the partner’s control.

• This insurance is guaranteed by the state budget, consequently facility C can only be concluded for the export of products with a Hungarian certificate of origin. The facility would cover the risk of the manufacturing period.

EXPORT RECEIVABLES INSURANCEEXPORT RECEIVABLES INSURANCE

• The object covered by the KV-facility insurance is the bank’s receivable purchased from a Hungarian exporter, originating from a medium or long-term supplier’s credit facility related to a foreign trade contract.

• The insured is the bank purchasing the receivable, or in the case of a bank consortium, the lead member of the consortium.

• The insurance covers the commercial and the political risk as well as the performance risk of the exporter.

• General 5 % self retention.

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SUPPLIER CREDIT DISCOUNTING INSURANCE (KV)SUPPLIER CREDIT DISCOUNTING INSURANCE (KV)

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OECD GUIDING PRINCIPLES

Main conditions of export credits•15% down-payment of the export contract value•85% financing of the export contract value•Repayment preiod: maximum 10 years (12 years for PP, RE, water)•Repayment frequency: semi annually•Interest rate: CIRR, fix rate for the entire life of the credit•Local cost: 30% of the export contract value•Risk premium: MPR based on country risk, buyer risk, tenor of the loan•Environmental and Social Policy•Special rules for•Project finance•Tied aid

FINANCING & INSURANCE CONDITIONSFINANCING & INSURANCE CONDITIONS

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• Tenor: 2-10 years (refinancing credit line for pre-financing: 2-5 years)

• Fixed interest rate for the whole tenor,payable every 3- 6 months in equal installments

(until 14.05.2015) EUR USD

2 - 5 years 0.81% 2.02%

5 - 8.5 years 0.93% 2.52%

8.5 - 10 years 1.09% 2.84%

CIRR (COMMERCIAL INTEREST REFERENCE RATE)

FINANCING & INSURANCE CONDITIONSFINANCING & INSURANCE CONDITIONS

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HUNGARIAN CONTENT

FINANCING & INSURANCE CONDITIONSFINANCING & INSURANCE CONDITIONS

Hungarian contentGoods: For any goods export at least half (50 %) of the goods transported within the framework of the export deal must be of Hungarian origin.Construction, installation: at least one quarter (25%) of the value of the Exporter’s contracts for construction, installation, technological installation, design and related services provided by the Exporter must qualify as export of Hungarian origin. Service: It is a requirement that more than fifty per cent of the employees of the Exporter (or its subcontractor in Hungary involved in the service) must be covered under the national obligatory insurance scheme. Certificate of Hungarian originProduct: certificate of origin issued by regional chambers of commerce and industryConstruction, installation: certificate is issued by the head office of the Hungarian Chamber of Commerce and Industry.Service: EXIM examines.

Address: Hungary, H-1065 Budapest, Nagymező street 46-48.Phone: +36 (1) 374 9100 / Phone: +36 (1) 374 9200

Fax: +36 (1) 269 4476 / Fax: +36 (1) 269 1198Web: www.exim.hu Email: exim@exim.hu

Thank you very much for your attention!Thank you very much for your attention!