The Export-Import Bank of the United States (EXIM) Board of Directors recently unanimously approved three transactions, including two that would utilize EXIM COVID-19 economic recovery measures. In total, the three authorizations would support an estimated 3,300 jobs across the United States.
On August 11 and August 14, 2020, EXIM’s Board of Directors voted unanimously to notify the U.S. Congress, pursuant to the law, of its consideration of these transactions. The Congressional notification period concluded earlier this month, allowing the EXIM Board to give final consideration to the transactions.
“Now, more than ever, our U.S. companies need to be competing in the global marketplace,” said EXIM President and Chairman Kimberly A. Reed. “Supporting American-made exports—along with the U.S. jobs that make these outstanding products and services possible—is essential to our nation’s economic growth and prosperity. Today’s board actions are evidence of EXIM’s commitment to our great American workers and businesses.”
In the first transaction, EXIM’s Board of Directors unanimously approved a 95 percent guarantee of a $250 million working capital loan facility under EXIM’s Working Capital Guarantee Program from PNC Bank, N.A., in Pittsburgh, Pennsylvania, to U. S. Steel. EXIM’s guarantee of the 11-month loan facility would allow U. S. Steel to monetize a portion of the value of three of its existing contracts to supply iron-ore pellets to buyers in North America and Asia. EXIM’s guarantee will enable the lender to accept the risk of the foreign contracts and U. S. Steel to fulfill the supply contracts. The transaction is estimated by EXIM to support 900 U.S. jobs in Minnesota and other states.
In the second transaction, EXIM’s Board unanimously approved a 95 percent guarantee of a $200 million supply chain finance facility from LSQ Funding Group, L.C., in Orlando, Florida, and Huntington National Bank, N.A. (HNB), in Columbus, Ohio, to U. S. Steel under EXIM’s Supply Chain Finance Guarantee Program. EXIM’s guarantee of the 12-month facility would support the purchase of accounts receivable due from U. S. Steel to 50 to 60 of its U.S. suppliers in approximately 16 states and the District of Columbia. LSQ Funding Group would enter into receivables purchase agreements with U. S. Steel suppliers under LSQ’s existing supply chain finance program, and HNB would further purchase the receivables from LSQ. EXIM would guarantee payment of the receivables, thereby extending its support to U. S. Steel and its network of suppliers across the United States.
Suppliers potentially benefiting from the Supply Chain Finance Guarantee Program transaction are located in Alabama, California, the District of Columbia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New York, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia. The potential transaction is estimated by EXIM to support 700 U.S. jobs.
The transactions are subject to mutually satisfactory negotiation of terms and conditions among U. S. Steel and the lending banks, as well as final approval by the U. S. Steel Board of Directors.
In a third, separate, transaction, the EXIM Board of Directors unanimously approved a transaction that could facilitate the authorization of $450 million of insurance coverage on letters of credit issued by the Trade Bank of Iraq (TBI) for the purchase of U.S. goods and services. The transaction is estimated to support 1,700 jobs across the United States.
Under this approval, EXIM is expected to authorize various transactions that will insure covered U.S. banks including J.P. Morgan in relation to TBI’s irrevocable letters of credit associated with the purchase of U.S. goods, such as agricultural commodities, including wheat and rice, as well as services, such as engineering, from America’s exporters. The broker for J.P. Morgan is Export Insurance Agency, Inc. of Walpole, Massachusetts, an active broker registered with EXIM for more than 40 years. Private-sector trade finance insurers are unavailable for this transaction, and EXIM support will protect U.S. exporters against the risk of buyer non-payment.
“I had the pleasure of spending time recently with Republic of Iraq Prime Minister Mustafa al-Kadhimi and Minister of Finance Dr. Ali Allawi,” Chairman Reed added. “So it is very exciting to take action today under the $5 billion Memorandum of Understanding I previously signed with the Republic of Iraq. We have more that we want to do and I look forward to working with our EXIM team, across the federal government, and with U.S. exporters—including our great American agriculture, engineering, and steel exporters—to send more U.S. goods and services to the Republic of Iraq, as well as to other countries around the world, while supporting U.S. jobs here at home.”
“The transactions we voted on this afternoon demonstrate EXIM’s importance to American workers,” said EXIM Board Member Spencer T. Bachus, III. “The Bank’s COVID-19 relief measures that were implemented in March 2020 will provide support for approximately 700 jobs. In addition, EXIM’s willingness to provide liquidity in a difficult market will help to sustain an additional 900 jobs for small businesses in the supply chain. EXIM’s ability to assume risk where the private sector does not participate will support 1,700 jobs and facilitate exports from America’s farmers and manufacturers, who have been hard hit in recent times.”
“From insuring agriculture exports to reduce food insecurity in Iraq to financing U. S. Steel products and their supply chains in America’s industrial heartland, these votes demonstrate EXIM’s continued commitment to supporting American jobs through exports, especially in industries uniquely affected by the global pandemic,” said EXIM Board Member Judith D. Pryor.
EXIM support may be extended only where there is a “reasonable assurance of repayment” and should supplement, not compete with, private capital. These transactions meet these requirements.
In March 2020, as part of EXIM’s COVID-19 response initiatives, EXIM temporarily approved an increased guarantee coverage option to 95 percent under its Working Capital Guarantee Program and Supply Chain Financing Guarantee Program, an increase from the agency’s standard 90 percent guarantee. The guarantees utilizing the increased coverage option are not to exceed one year effective from the date of the financing.