Export Credit Office underwrites $8 million deal

The underwriting of a $8 million export deal by Dunedin based Scott Technologies by the Export Credit Office was today welcomed by Associate Minister for Industry and Regional Development, Pete Hodgson.

Under the deal Scott Technologies will export $8 million worth of automated oven production lines to Turkey.

The buyer made the provision of finance arrangements by the Export Credit Office a condition of the deal.

The deal is the first to be underwritten solely by the Export Credit Office. Since its establishment, it has priced and been willing to support 160 deals with a cumulative value of $1.6 billion. Some of these have been taken up by other finance providers following work being done on them by the Export Credit Office.

"The Export Credit Office's underwriting of this deal, and the other $1.6 billion of deals in which it has had an involvement, are excellent examples of the innovative action this government is taking to support the economy," said Pete Hodgson. "I'm delighted to see yet another success."

Chris Hopkins, of Scott Technology said: “this sale is an extremely good result for us. It opens up a new market and significant potential for us looking forward, something that we will be looking to use to deliver future value to our shareholders.

“One of the most pleasing aspects was that we faced tough international competition but the quality of our product and the structure of our deal won out. The demands that our buyer put on us meant that in terms of financing we needed to be more flexible than we have needed to be in the past. Without doubt, the support and advice we received from the Export Credit Office played a big part in that.”

What is export credit?

Export credits are a way for NZ exporters to offer finance to their buyers. Finance is provided to a foreign buyer or bank and is guaranteed by the Export Credit Agency.

What does the Export Credit Office cover?

The ECO provides medium to long-term trade credit insurance. It covers up to 90% of commercial risks, eg the buyer goes bankrupt. It covers up to 95% of political risk, eg if a buyer’s country restricts capital flows.

The four products the ECO offers are:

Medium to long-term supplier credits - where the exporter provides a foreign buyer a loan. Medium to long-term buyer credits – where a bank provides a loan to a foreign buyer or their bank via a loan contract. Medium to long-term financing guarantee – where a bank provides a loan to a foreign buyer, or their bank, via letters of credit, bills of exchange or promissory notes. Pre-shipment trade credit insurance – insurance for exporters to cover the buyer and country risks the ECO normally covers, but during the production of the goods or services.

Benefits

To the exporter NZ exporters can offer finance terms when selling capital goods or services. NZ companies are better able to compete with international firms offering these products. Buyers pay over time but the exporter gets the cash according to the supply contract. The exporter will get paid, by covering commercial and political risks. If payment is guaranteed, banks are more willing to offer finance.

To the buyer They can purchase capital goods from New Zealand exporters without having the funds upfront. The cost of finance will often be cheaper and more flexible than that available in their home market. They do not need to raise finance locally.

For more detail see: http://www.treasury.govt.nz/exportcreditoffice/ or http://www.nz-exportcreditoffice-agent.dk

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