Turkcell is buying equipment from Ericsson financed with a USD 150 million loan guaranteed by EKN. The transaction is the first for ten years between Turkcell and EKN.
On January 21, 2019, EKN launched supplementary conditions to help customers who use the “Guarantee for Loss on Claim for Exporter” credit period for over 12 months. The new conditions, which have been developed to comply with the EU capital requirements regulation, give a refinancing bank improved rights to compensation.
The long-awaited supplementary conditions improve the EKN guarantee as credit protection to enable a bank that buys EKN-guaranteed receivables or takes EKN-guaranteed receivables as security, to record the risk in the transaction as a risk on EKN.
“Essentially this means that the risk is on the Swedish state rather than the buyer or the exporter,” says Marie Aglert, Director Large Corporates, EKN. “There is less performance risk and banks won’t have to reserve capital to prevent future losses with the state taking on the risk.”
Who is eligible?
“The new supplementary conditions will be offered for all new transactions and transactions where EKN has already issued a guarantee offer but not yet issued a guarantee. The supplementary conditions can also be offered for deliveries in transactions where one or more guarantees have already been issued. Of course rights under the guarantee to the bank can still be transferred without using the new supplementary conditions.”
What do the new supplementary conditions entail for the bank?
“EKN will compensate the bank if non-payment occurs, even if the claim is unclear or if the guarantee holder has not followed the guarantee’s terms and conditions. The bank is obliged to keep EKN informed of problems that arise in the transaction and to take measures in order to minimize loss.”
What do the new supplementary conditions entail for the exporting company?
“EKN has a conditional right of recourse on the exporting company. The right of recourse is applicable if EKN pays compensation to the bank, which would not have been paid without the supplementary conditions, for example when there is an unclear claim such as a dispute between the debtor and the exporter.”
What happens when the buyer does not pay, claiming that the goods are defective?
“EKN will compensate the bank in accordance with the guarantee if the buyer has signed a valid and binding independent payment obligation. EKN then has a right to demand repayment from the exporting company. However, EKN will not require repayment if the exporting company can show that they have fulfilled their obligations towards the debtor.”
Are there any other changes to the terms and conditions?
“When indemnifying in a transaction in local currency, EKN converts the local currency to Swedish kronor. Until now, EKN has applied a maximum currency rate for the local currency. For guarantees issued on or after January 21, 2019 a maximum rate no longer applies. This change has been requested and removing this cap enables a greater comfort to the guarantee cover, not the least for refinancing banks.”
Will there be further changes to the terms and conditions for banks in any of EKN’s other products?
“As demand for EKN’s Guarantees for loss on claim for exporters grows, it’s important that all banks have the opportunity to use it and we are continuously working to give banks more options for better indemnification. We are, for example, currently working on improving the conditions for credit periods under 12 months.”