Financing your Global Expansion
Glen Dooley
(for Ruth Bender)
June 18, 2003
Scope
• Profile of An International
Bank - WACHOVIA
• Understanding and
Managing Risk
• Trade Finance/Letters of
Credit
• Structured Trade Credit
• Asset-Based Finance
• Clean Credit
WACHOVIA CORPORATION - SUPERIOR MARKET
SHARE AND A DISTRIBUTION POWERHOUSE
MANAGEMENT:
G. Kennedy Thompson –Chairman,
President and CEO
HEADQUARTERS: Charlotte, North Carolina
US RANKINGS:
Largest deposit share on the East
Coast, second largest U.S. share
Second largest cash management provider
Third largest branch network
Fifth largest in assets
Fifth largest brokerage firm based on
registered representatives
TOTAL ASSETS:
$342 billion
MARKET CAP:
$ 49 billion
BRANCHES:
2800
ATMs:
4600
EMPLOYEES:
Over 84,000
(As of 12/31/02)
WACHOVIA CORPORATION
Market Capitalization of Banks
Asset Size of Banks
Dollars in Billions
Dollars in Billions
Citigroup
Bank of America
Wells Fargo
Wachovia
J.P. Morgan Chase
Bank One
U.S. Bancorp
Fifth Third Bancorp
FleetBoston Financial
Bank of New York
BB&T
National City Corp
SunTrust
PNC Financial
KeyCorp
$180.9
Citigroup
104.4
79.0
49.4
47.9
42.5
40.6
33.6
25.5
17.4
17.4
16.7
16.0
11.9
10.6
J.P. Morgan Chase
Bank of America
Wells Fargo
Wachovia
Bank One
FleetBoston Financial
U.S. Bancorp
National City Corp
SunTrust
KeyCorp
Fifth Third Bancorp
BB&T
Bank of New York
PNC Financial
As of 12/31/02
$1,097.1
758.8
660.4
349.2
341.8
277.3
190.4
180.0
118.2
117.3
85.2
80.8
80.2
77.1
66.3
Wachovia International Division
A Global Presence
London
Los Angeles
San Diego
Paris
New York
WinstonPhiladelphia
Salem
Washington, D.C. Madrid
Charlotte
Miami
Hamburg
Frankfurt
Milan
Istanbul
Seoul
Beijing
Dubai
Cairo
Guangzho
u Kong
Hong
Bangkok
Tokyo
Shanghai
Taipei
Manila
Mumbai
Cebu
Kuala
Singapore Lumpur
Mexico City
Bogota
Jakarta
Guayaquil
Sao Paulo
Johannesburg
Santiago
Buenos Aires
International Processing Centers
Offices
Overseas Branches
Global Government Banking
Sydney
Understanding and Managing Risk
• Risk Mitigation Begins With Identification and Measurement
- Credit Risk
- Liquidity Risk
- Market Risk
- Operational Risk
- Reputational Risk
- Settlement Risk
- Sovereign Risk
Understanding and Managing Risk……
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Correspondent Bank Infrastructure
Credit Appetite For Letter of Credit Confirmation
Deposit Products-USD & Foreign Currency
FX - Global Netting and Pooling
Economic Analysis (Wachovia Resources Available to You)
Lending Services
wachovia.com/international
Expert International Commentary
Jay Bryson
provides analysis
on financial
markets and
macroeconomic
developments in
foreign economies. Before joining
Wachovia, Dr. Bryson was an
economist in the Division of
International Finance at the Federal
Reserve Board in Washington, DC
where he monitored and analyzed
developments in the foreign
exchange market.
Subscribe via: Denise.LaMartina@wachovia.com
Trade Finance/Letters of Credit
• Methods of Payment/Credit Sales
• The Trade Letter of Credit
• Pre-export and Bankers Acceptance
Financing
• A Body of Governing Laws and
Regulations
• The World of E-Commerce
Comparison of Various Methods of Payment
Export Letter of Credit
Issuing and Advising
Export Letters of Credit
Presentation
Structured Trade Credit
GOVERNMENT PROGRAMS
• Export Import Bank of the United States (“EX-IM
BANK”)
• Overseas Private Investment Corporation (“OPIC”)
• Commodity Credit Corporation (“CCC”)
• Small Business Administration (“SBA”)
• USAID - Developmental aid via grants, loans and project
support
• U.S. Department of Commerce - Trade Advocacy Center
• State Sponsored Trade Promotion Centers
• Multilateral Agencies (World Bank, IMF, IFC, IDB, ADB,
EBRD)
U.S. EX-IM BANK
The Export Import Bank of the United States
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Independent Agency of the U.S. Government
“Full Faith & Credit” of the U.S. Government
Promotes Exports of U.S. Goods & Services
Not an AID or Development Agency
Requires “Reasonable Assurance of Repayment”
Does not Compete with U.S. Banks
EX-IM BANK PROGRAMS
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Short Term Programs (Up to 360 Days) - Most U.S. exports are eligible
– Working Capital Guarantees: 90% guarantees to U.S. banks for export
related financing facilities to U.S. exporters
– Export Credit Insurance: 90% risk protection provided to U.S. exporters
on their foreign accounts receivables.
– Bank LC Insurance: 95% risk protection provided to banks on their LC
confirmation risks.
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Medium/Long Term Programs (Up to 12 years) – U.S. capital goods/services
– Project Finance: Larger projects supported by project cash flows & preestablished off-takes (usually deals of $50 million +)
– Direct Loans: Loans from Ex-Im to a foreign borrower, often government
to government (usually deals of $50 million +)
– Guarantees: Guarantees to lenders on loans to buyers of U.S. goods
– Medium Term Insurance: Risk protection to lenders (< $10 million)
OPIC
Overseas Private Investment Corporation
• Independent Agency of the U.S. Government (“Full Faith & Credit”)
• Promotes U.S. Investments Overseas
• Programs:
Direct Loans/Guarantees - financing the new plant and expansion of
U.S. joint ventures or offshore projects with U.S. equity interests
Political Risk Insurance - coverage of offshore assets of U.S. investors
Investment Funds - participation in investment funds focused on
emerging markets
SME’s - increased focus on supporting small & medium sized U.S.
companies expanding overseas including partnership with SBA and
pilot program with Wachovia announced in 2002
OPIC
Wachovia - SME Pilot Program
Program:
Purpose:
Borrower:
Projects:
Term:
Coverage:
Loan Size:
Spread:
$100mm Framework Agreement
To support overseas investments of U.S. small and
medium businesses (sales up to $350 million)
Local Banks or Corporate Borrowers
New plant or project development involving eligible U.S.
investors in OPIC eligible Countries
Up to 10 years
For years 1-3: 50% (U.S. Obligor)
75% (Offshore*)
For years 3-5: 75% (U.S. Obligor)
90% (Offshore*)
For years 5+: 90% (U.S. Obligor)
90% (Offshore*)
*100% Currency Inconvertibility
$100,000 - $15,000,000
Set deal by deal based on underlying project
Commodity Credit Corporation
GSM(102/103) Programs
Program:
Products:
Borrower:
Term:
Coverage:
Average Size:
Benefits:
U.S. Department of Agriculture Guarantee Program
Bulk agricultural commodities exported from the U.S.
Local Banks approved by CCC in more than 40
countries around the world.
GSM-102 Program - LC refinancings to 3 years
GSM-103 Program - LC refinancings to 10 years
98% of principal & partial interest protection
$250,000 - $25,000,000
Lower pricing and longer tenors than would otherwise be
available in the private markets.
Export Credit Insurance
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Providers:
Specialized insurance offered by Ex-Im & private insurers
such as AIG, FCIA, EIC, Euler, Coface, NCM, Zurich
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Coverage:
Comprehensive coverage for non-payment that is
conditioned on insured performance (premium payment,
valid debt obligations, no product disputes, etc...)
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Uses:
Risk Protection on short term foreign a/r’s against
bankruptcy, refusal to pay, and/or country events
Financing/Liquidity
Qualifying foreign a/r’s for commercial banking collateral
Bank purchases of insured foreign a/r’s
Securitization of larger pools of insured foreign a/r’s
Political Risk Insurance
• Providers: Specialized insurance offered by Ex-Im, OPIC,
MIGA and private insurers such as AIG, Chubb, Sovereign,
Zurich
• Coverage: Coverage against certain defined country risks such
as war, insurrection, terrorism, nationalization, confiscation,
currency inconvertibility
• Uses:
- Protection of assets located in offshore markets
- Risk mitigation component in a Project Finance
structure
- Piercing “Sovereign Ceiling” in Intl.
Securitizations
Trade Related Asset Sales
• LC Discounts: Post negotiation prepayment of LC of the obligations of
confirming, accepting or issuing bank.
• Forfaiting:
Purchase of promissory notes, drafts, debt instruments
Often guaranteed (avaled) by a local bank.
Typically larger $ size & longer tenors ($1mm+/1 year+).
Offered by international banks & forfaiting boutiques
• Factoring:
Purchase of open account receivables
U.S./European debtors
Typically smaller in $ size & shorter tenors
Offered by specialized factoring companies (CIT, GE,)
Asset-Based Finance
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Secured Working Capital (inventory and accounts
receivable) Credit
Factoring
Fixed-Asset Finance and Leasing
Asset Securitizations
- Mortgages
- Collateral Loan Obligations
- Future Flow Transactions
Clean Credit
• Requires Well-Developed Commercial Laws,
Detailed, Accurate and Timely Financial
Reporting and Cash Flow-Oriented Lenders
• Typically Not Available in Emerging Markets
• Unsecured Lenders Stand Last in the Queue for
Repayment
• Personal Guarantees and the Pledging of Outside
Assets May be Required