Indication Letters and Premium and Interest Rate Holds
INDICATION PROCEDURES
Indication procedures, for both insurance and finance products, involve two documents. Each document applies to a different stage in the contract negotiation process. They are as follows:
- Preliminary Response Letter
This letter is used to respond to enquiries made concerning cover and premium rate prior to your preparing a formal tender or offer for the contract concerned. While the letter will provide details of the current premium rates and the terms and conditions on which ECGD might be prepared to provide cover and any fixed rate export finance support, it will contain no commitment to provide cover nor is it a commitment to provide any fixed rate export finance support or hold the premium rate.
Premium Rate Hold Letter
This letter is used when ECGD is advised that an exporter is in the process of preparing a formal offer or tender in pursuit of a particular contract. In common with the Preliminary Response Letter, the likely terms and conditions of any cover that ECGD might offer will be outlined and any known potential problems identified.
If the proposed export contract is eligible for fixed rate export finance support, the letter will outline the terms on which ECGD might be prepared to consider such support. Again, however, the letter will contain no commitment to provide cover or interest rate support.
- Letter of Intent / Offer of Support
Once the exporter has secured its contract and ECGD has decided to provide insurance or give support to its financing, ECGD will issue a Letter of Intent. This letter commits ECGD cover.
If you require any further information, regarding the indication procedures please contact:
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INTEREST RATE HOLD PROCEDURES
Fixed interest rates available with ECGD support
ECGD's guarantees can give access to fixed rate finance from UK banks allowing exporters to offer buyers finance at favourable rates.
The level of support that can be provided by an Export Credit Agency that belongs to the OECD is governed by an international agreement (the OECD Consensus). The minimum fixed interest rate we can support is determined by CIRRs (Commercial Interest Reference Rates), which vary according to the currency of finance.
There are two types of CIRR, contract CIRR and pre-contract CIRR. CIRRs are calculated monthly for most OECD currencies and are designed to reflect the market rates that would be available to a first class corporate borrower for long-term fixed rate export finance, if such finance were commercially available. The rates are revised on the 15th of every month.
The Fixed Rate Export Finance Support Scheme
The key features of the scheme of support for fixed rate export finance are as follows:
- ECGD interest rate support will only be available in relation to export finance loans with a value not exceeding a certain threshold according to the currency of the loan. At present the thresholds are £50m for sterling loans, US$90m for US dollar loans, euro 70m for euro loans and Yen 10,000m for Yen loans. However, ECGD may vary these thresholds from time to time;
- Availability of ECGD interest rate support will be subject to ECGD having sufficient budgeted funds with which to provide that support;
- ECGD provides interest rate support based on Contract CIRRs; and
- The fixed interest rate which ECGD will support will be the CIRR prevailing at or about the time at which the Buyer Credit (BC) loan agreement, or, as the case may be, the Supplier Credit Finance (SCF) facility loan contract is released by the lending bank for signature by the borrower.
In most cases, the rate that ECGD is willing to support will initially be held for a period of 30-days from the date on which it is determined. However, recognising that, in certain markets, 30-days may not be a sufficient period to arrange for signature of the loan and guarantee documentation for a BC facility or acceptance of ECGD’s offer to provide an SCF facility, the initial period for which the rate will be held will be 60-days for contracts with public or sovereign borrowers in the following countries:
- Mexico
- Iran
- Brazil
- Turkey
- Vietnam
- Libya
- Uzbekistan
ECGD will also consider, on a case-by-case basis, requests to hold the CIRR for an initial period of 60 days in relation to specific transactions in other markets, subject to the exporter or the financing bank providing ECGD with legitimate reasons for this proposed concession.
In addition, the initial period for which the rate will be held will be 60-days for SCF cases where either the premium is being paid out of the loan or the transaction involves the use of bills of exchange or promissory notes. This would apply to business in any country and with any type of borrower (i.e. sovereign, public or corporate).
If the BC loan agreement or SCF loan contract has not been signed by all parties by the end of the 30-day period or, as the case may be, 60-day period, (or, if the final day of that period is not a business day, the next following business day), then the original supported rate will no longer apply and a new supported rate will be determined on that day and on each successive thirtieth day thereafter provided that ECGD’s BC Letter of Intent, or as the case may be SCF Offer of support, has not by then expired.
However, if by the end of the validity period specified in the Letter of Intent (in the case of a BC) or Offer of support (in the case of an SCF) the BC loan agreement, or, as the case may be, the SCF loan contract, has not been signed by all parties, ECGD’s commitment to provide interest rate support will cease.
Further information
Further information about ECGD’s fixed rate export finance scheme, and any changes made to it from time to time, will be posted on this website.
If you require further information regarding interest rate hold procedures, please contact:
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