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Instructions for Using Exposure Fee Advice Tables

The instructions are presented step-by-step. Once you reach the step that provides the relevant exposure fee level (which is the same for all transactions in a given market) and transaction risk increment (which is specific to the transaction), you need not proceed to subsequent steps.

Although the exposure fee level will always be known for all transactions in a given market, in determining the appropriate transaction risk increment, Ex-Im Bank's assessment of the credit's strengths, weaknesses, and uncertainties may lead to an adjustment from the transaction risk increment indicated on the table, particularly with respect to transactions covered by Steps 3 and 6.

Step 1. If your transaction involves a sovereign borrower/guarantor (e.g., Ministry of Finance or equivalent which conveys the country's full faith and credit), the transaction risk increment is given under section A on the"Public Sector Credits" table.

Step 2. If your transaction involves political-only cover for a private sector transaction, the transaction risk increment is given under section B on the "Private Sector Credits" table.

Step 3. If credit ratings and/or market spreads for the transactions' borrower/guarantor are available, Ex-Im Bank will assign a transaction risk increment based largely on this information, using sections C1 and C2 of the Fee Level Chart. Ex-Im Bank will consult S&P (212-208-1527) and Moody's (212-553-0300). For financial institutions, Ex-Im Bank will also consult IBCA (212-687-1507) and subscription services such as Thompson Bankwatch Capital Intelligence and BREE. In a small number of cases, Duff & Phelps (312-263-2610) and Fitch (212-905-0582) will provide ratings. Ex-Im Bank may accept ratings from local rating agencies, if these agencies benchmark to S&P or Moody's ratings. Ex-Im Bank will also examine recent credit spreads on internationally traded debt. Sometimes, multiple ratings/spreads will yield a range of possible transaction risk increments. If so, Ex-Im Bank will evaluate which transaction risk increment is most appropriate, as part of its assessment of a credit's strengths, weaknesses, and uncertainties. In the majority of cases, the final transaction risk increment will fall within the range of transaction risk increments indicated by the available rating and spread information.

Step 4. If your transaction's financed/insured amount is $10 million or less (excluding the exposure fee), the transaction risk increment generally will be that given under section D1 or D2 of the Exposure Fee Advice Tables. The transaction risk increment may be lower or higher if Ex-Im Bank has pre-approved a transaction risk increment for the borrower/guarantor.

Step 5. If the borrower/guarantor for the credit is one of the country's largest profitable financial institutions, but is not rated by a credit rating agency, the transaction risk increment is given under section E on the appropriate (public/private) Exposure Fee Advice Table. To qualify, a financial institution must meet two tests: (1) total assets must comprise at least 1/10th of the country's domestic credit, as reported on line 32 of the IMF's "International Financial Statistics"; and (2) net income/assets must exceed 1.00 percent on average over the last two years.

Step 6. If the transaction's borrower/guarantor is not rated by a credit rating agency and does not qualify under Step 5, Ex-Im Bank will assign a transaction risk increment using sections F1 or F2 on the Exposure Fee Advice Tables as a guidepost for a possible transaction risk increment. Sections F1 and F2 give guidepost transaction risk increments for combinations of key ratios, using year-end data from independently audited financial statements. For definitions of the terms used in these ratios, see Explanation of Terms Used in Section F of the Fee Advice Tables.

Section F1 covers credits with borrowers/guarantors other than financial institutions; the guidepost transaction risk increment is based on combinations of two key ratios. Section F2 covers financial institutions; the guidepost transaction risk increment is the simple average of the transaction risk increments for five key ratios, rounded to the nearest whole number. In assigning the transaction risk increment, Ex-Im Bank will evaluate potential adjustments to the guidepost transaction risk increment as part of its comprehensive assessment of a credit's strengths, weaknesses, and uncertainties.

Small Transactions

A "small transaction" is a medium-term transaction with a financed or insured amount of $10 million or less, excluding exposure fee or premium.

Ex-Im Bank has developed specialized procedures for evaluating financial risk in small transactions. They are designed to promote efficiency and maintain credit quality by limiting and standardizing the scope of financial evaluations. Using these procedures, Ex-Im Bank is able to prudently accept more small transactions without repayment guarantees. Questions may be directed to Business Development, (202) 565-3946.

Risk Assessment

Small transactions need to comply with all Ex-Im Bank policies related to the extension of credit. Assuming the small transaction qualifies for support, Ex-Im Bank will then perform its risk assessment to determine (1) whether or not reasonable assurance of repayment exists, and (2) the appropriate transaction risk increment.

Ex-Im Bank will use the following sources of information in determining reasonable assurance of repayment on small transactions:

• Credit ratings and market spreads
• Credit agency and bank references
• Historical financial statements
• Ex-Im Bank's credit experience with the borrower/guarantor and its industry
• Ex-Im Bank’s credit experience with the borrower/guarantor and its industry

Ex-Im Bank will generally review only the information listed above, and not such information as market studies or cash flow forecasts. While the risk assessment process for large and small transactions is the same, the difference is in the narrower scope of information reviewed for small transactions.

The determination of the transaction risk increment for small transactions will vary depending on the type of risk under consideration. For sovereign and political only risk transactions, Ex-Im Bank will generally review only the status of the borrower’s/guarantor’s payments on its Ex-Im Bank obligations. For all other small transactions, Ex-Im Bank will review available credit ratings and market spreads provided by the applicant to determine the appropriate transaction risk increment, using Step 3. If reliable ratings or spreads are not provided, Ex-Im Bank generally will assign the transaction risk increment shown in section D of the Exposure Fee Advice Tables. If Ex-Im Bank has pre-approved a transaction risk increment for the credit, the pre-approved transaction risk increment applies. Contact the Business Development Division to determine if a transaction risk increment has been pre-approved.

Ex-Im Bank does not require independently audited financial statements for transactions when the financed/insured amount is $1 million or less, excluding the exposure fee or premium, provided the unaudited statements are accompanied by an acceptable explanation of accounting principles used in their preparation. In such cases, if Ex-Im Bank determines that reasonable assurance of repayment exists, the applicable transaction risk increment is shown in section D of the Exposure Fee Advice Tables.

• If Ex-Im Bank or other creditors have had negative payment experience with the borrower/guarantor, a significantly higher transaction risk increment may be applied.
• Transactions in the smallest developing-country economies, as designated on their Fee Level Chart, may incur a fee level penalty if the transaction could create a significant net foreign exchange burden on the local economy.

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