MLT (Medium-long term) export financing

MLT (Medium-long term) export

financing

MLT export financing

n MLT export financing is a medium-long-term (2-10 years) financing structure for

buying Hungarian goods and services, which is intended to provide financing allowing Hungarian exporters to get the consideration for their goods or services immediately after delivery.

n Hungarian exporters use MLT financing mainly for trade transactions including

machinery export (agricultural machines, custom instruments, high-value industrial equipment) and also for financing their general contractor activities (constructing health institutions, sports facilities, power plants, educational institutions, logistics centers and residential real estates), but there can be further tailor made solutions as well.

Typical financing structure of MLT export financing

n This facility allows requesting medium-long-term financing for up to 85% of the

export contract value.

n Euro and US dollar are the two most typical currencies used in relation to this

Conditions for MLT export financing

n Magyar Exporthitel Biztosító Zrt. (MEHIB) provides credit insurance up to

90-95% of the financed amount, while the risks associated with the 5-10% residual value are shared among the exporter, the importer, the commercial bank and credit insurance company.

n Based on the risk assessment of the transaction the Bank/MEHIB may ask for

further collateral.

MEHIB-insurance

n In compliance with the requirements set forth in Government Decree No.

312/2001. (XII. 28), having a specific Hungarian origin is a precondition to the provision of the MEHIB insurance: the minimum quota for Hungarian origin is set 25% for general contractor contracts related to construction or assembly work exceeding EUR 5 million and at least 50% in all other cases.

n Eligible borrowers include government and municipal buyers, banks and private

buyers and SPVs based on the country risk

n An advance payment equal to at least 15% of the commercial contract must be

made available (in the form of a cash payment or bank guarantee) not later than the delivery date under the commercial contract (starting point)

Advantages of MLT export financing

n Financing the exporter off balance sheet

n Customized financing with a variable (LIBOR) or fixed interest rate

(CIRR-based) with a tenor aligned with the return period, cheaper financing option for the importer, which offers advantages to the exporter.

n Neutralizing the importer’s payment and country risks since the exporter gets its

money from its bank when it (partially) delivers under the export contract.

n It also allows making export transactions involving larger volumes than those in

Buyer’s Credit

Exporter

Exporter

_Buyer

_Buyer

K

K

&H

&H

Credit

Agreement

Commercial contract

MEHIB

MEHIB

Risk-sharing Agreement

Hungarian

Hungarian

EXIMBANK

EXIMBANK

(CIRR)

(CIRR)

Buyer’s Credit

n A Buyer’s Credit is a separate financing agreement, whereby the Bank grants a

loan to the foreign not OECD country based Buyer.

Structure

n The basis of the financing is the valid export contract (‘Commercial Contract’)

signed between the Hungarian Exporter and the Buyer.

n The main collateral of the financing is the MEHIB insurance concluded between

the Bank and MEHIB on the Commercial Contract value decreased by the advance payment made by the Buyer. (Upon agreement with MEHIB, the insurance premium paid by the Exporter may be paid from the credit.)

n In order to allow the transaction to be insured, the conditions of MEHIB must be

taken into consideration, when formulating the Commercial Contract.

n The Exporter will receive payment during the (partial) performance of its

Bank-to-bank Credit

Exporter

Exporter

_Buyer

_Buyer

K

K

&H

&H

Credit Agreement

Commercial contract

Bank

Bank

MEHIB

MEHIB

Risk-sharing Agreement

Hungarian

Hungarian

EXIMBANK

EXIMBANK

(CIRR)

(CIRR)

Bank-to-bank Credit

n When an export financing credit is provided directly to the Buyer’s bank abroad

(based in a not OECD country) , it is known as a Bank-to-bank credit.

Structure

n The basis of the financing is the valid export contract (‘Commercial Contract’)

signed between the Hungarian Exporter and the Buyer.

n The main collateral of the financing is the MEHIB insurance concluded between

the Bank and MEHIB on the Commercial Contract value decreased by the advance payment made by the Buyer. (Upon agreement with MEHIB, the insurance premium paid by the Exporter may be paid from the credit.)

n In order to allow the transaction to be insured, the conditions of MEHIB must be

taken into consideration, when formulating the Commercial Contract.

n Exporter receives payment during the (partial) performance of its contract

Supplier Credit

Exporter

Exporter

_Buyer

_Buyer

K

K

&H

&H

Commercial contract, with

deferred payment

MEHIB

MEHIB

Financing Agreement

Insurance

assigned to

the Bank

Hungarian

Hungarian

EXIMBANK

EXIMBANK

(CIRR)

(CIRR)

Supplier Credit

n A Supplier Credit is a financing solution granted to the exporter in order to

refinance deferrals of payment offer to the buyer within the framework of an export contract (‘Commercial Contract’)

Structure

n The basis of the financing is the valid export contract (‘Commercial Contract’)

signed between the Hungarian Exporter and the Buyer.

n Financing takes place through purchasing the receivables of the Exporter

deriving from the Commercial Contract. The financing has the same terms and conditions (amount, tenor, etc.) as those applying to the deferrals of payment.

n The main collateral of the financing is the MEHIB insurance concluded between

the Exporter and MEHIB on the Commercial Contract value (including cost of deferred payment) decreased by the advance payment made by the Buyer. (Insurance premium to be paid by the Exporter.) The MEHIB insurance must be assigned to the Bank

Why to cooperate with us?

Post-financing

Bonds &

Guarantees

Eximbank Integrated approach full-package solution MEHIB Pre-financing / advance payment

Additional financing solutions related to MLT financing

ØAdvance payment financing (usually available for bank-to bank financing transactions)

ØBank guarantees

required for delivery under the export contract

ØPre-shipment financing for the exporter (for the period preceding the export deliveries) with customized conditions

Credentials

-2009 Russia 2009 Russia 2010 Belarus

Russian County Government USD 1.8 mln Construction of Hospital Hungarian contractor -Russian Republic EUR 38.2 mln Construction of Hospital and Delivery of Medical

equipments Hungarian contractor

-State owned Belarus bank EUR 2.3 mln delivery of LFL KT line of fluorescent lamps - Multinational Company-2010 Russia Russian County Government EUR 38 mln ticket in a EUR 81 mln financing Arranger / Agent Construction of Hospital and Delivery of Medical

equipments - Hungarian contractor

This presentation has been distributed by K&H Bank Zrt („K&H”), a subsidiary of KBC Bank NV (“KBC”).

The information in this presentation is confidential and proprietary to K&H and is not to be reproduced or used for any purpose other than as general background information without the express prior permission of K&H.

This presentation does not represent an offer or commitment on the part of either K&H or KBC, nor any of their affiliates to participate in any transaction. Nothing contained in this presentation is, or shall be, relied upon as a promise or representation as to the future.