TXF Global 2020 Export Finance: Virtual event report
As the dust settles after last week’s TXF Global 2020 Export Finance: Virtual event, the findings from the bespoke survey put to e-delegates will continue to surprise and inform the ECA community as much as the conference itself.
ECAs have shown great flexibility, adaptability and risk appetite in response to the Covid-19 crisis. But, according to data collected from a unique survey developed specifically for all of the TXF Global 2020 Export Finance event attendees to take last week, there is room for improvement.
Mitigating the economic fallout for exporters, project sponsors and banks was a natural reflex action of ECAs at the beginning of the pandemic, with the roll out of new product suites and adapted offerings re-affirming agencies as an invaluable countercyclical economic policy tool.
During previous crises like the Global Financial Crisis (GFC), ECAs tend to pull out all the stops and embrace the challenge proactively. So if we are to use the GFC as a model, then, the future looks bright for ECA clients.
However, while the GFC is a useful referential template, it must be acknowledged that Covid-19 represents an entirely different crisis. Sectors are not universally blighted, with continued interest in telecommunications and healthcare, whereas the GFC created a liquidity crisis across sectors.
What we did and how we did it
TXF’s Global 2020 Export Finance: Virtual event brought together more than 1500 advisers and consultants, banks, ECAs, exporters, importers, law firms, insurers from across the export finance industry to discuss the latest trends and challenges that the industry faces. While only a small portion of those online delegates took part in the survey – 29 respondents – the sample helped to provide insights into export finance market sentiment amid the pandemic.
To contextualise the survey data, qualitative quotes collected through email correspondence are used to explain the trends, along with closed deal data from TXF Data and external literature to place the report’s findings into the wider export finance landscape.
The findings
- The majority of respondents said ECAs will be able to support their clients through the pandemic. However, this is only a narrow majority of 59%, and there are a sizeable 41% of respondents who are not confident that ECAs will be able to pull out all the stops this time.
- The market’s opinion is split when it comes to the impact of Covid-19. While optimists see only medium-term impact affecting certain industries – namely aviation, shipping, and oil & gas – some doomsday predictors expect long-term ripples to be felt across the economy.
- Full debt cover and 100% direct lending facilities are the two most valued ECA products for exporters. Together, they provide an environment within which exporters are able to take advantage of more favourable pricing conditions, thus shielding them from the more costly private insurance and commercial banking markets.
- There is a strong sense that collaborative ECA and DFI financing will increase over the coming years; an outcome seen as a possible response to combat a constrained commercial bank appetite and liquidity challenges in the export finance markets. Blended finance has helped sponsors to take a more holistic approach to project finance, but other structures are also plausible: ECA cover for exporter payments out of a DFI-tranche, ECA-backed DFI lending, or to cooperate under partial risk guarantees. Perhaps another method of collaboration is with DFIs providing equity, covered by ECA grantee schemes.
- We simply do not know how long this crisis will last. We could develop a vaccine faster than expected, prompting a ‘return to normal’, or we could face a deadly second wave that forces global markets back into lockdown. If there’s one thing that spooks investors, it’s uncertainty. We see a relatively even split between respondents’ views on the future of the market given Covid-19, and this is what we must come to expect from uncertain, unprecedented conditions.
- Paying premiums upfront for the maturity of project loans was said to be a deterrent to accessing export finance, a finding that is only likely to perpetuate given the unprecedented events which have caused ECAs to up the percentage of their guarantee coverage and product offerings
Canvasing online conferences for market sentiment (and virtual events) are only going to gather steam as the world continues to recoil and recalibrate from the impact of the Covid-19 pandemic.
To read the full-report, which has more forensic analysis on the impact of the Covid-19 crisis on the cost of ECA-backed debt, then please contact TXF by emailing intelligence@txfmedia.com
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