£5 billion Export Refinancing Facility launched
The Government has launched an Export Refinancing Facility (ERF) aimed at enabling UK-based exporters to offer competitive long-term financing to overseas buyers requiring loans of over £50 million.
The scheme is targeted at project sponsors in emerging markets who need long-term loans to finance investment-related capital goods and services such as large-scale construction or infrastructure projects.
The scheme will therefore support UK bids for projects that typically involve lengthy contract negotiations – it’s the first time this financing approach is being used for civil project finance by an export credit agency.
The ERF allows overseas buyers to access funding in the debt capital markets to refinance loans after their initial funding by the banks – UK Export Finance will guarantee repayment of bonds issued by the buyer to refinance the initial loan.
So the bonds will 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.