Global export finance 2017: Numbers crunched without the headache

TXF Data recorded 278 ECA supported deals (a drop of 76 on 2016) covering $84.6 billion of financing (a drop of $40 billion on 2016). This represents a decrease of 48% in ECA supported deal volume compared with 2016 – in effect a return to the levels of 2015.

However, ECA/DFI coverage of that total debt amounted to 92.7%, an increase of 40% on 2016 – a reflection of how increasingly risk aware the commercial bank market has become following recent Basel regulation.

The drivers and breaks on growth for the year were:

• Aircraft was the least active ECA-backed export finance market again in 2017, although lack of access to ECA funding merely resulted in more commercial bank and captive finance deals from the big two aircraft manufacturers, and no dent in their respective order books. But for Airbus, ECA doors are beginning to open again. Both UKEF and Bpifrance have agreed to fund Airbus exports on a case-by-case basis.
• In 2016 ECA-supported conventional power deal volume spiked dramatically from $4.5 billion in 2015 to over $30 billion. But remove the $18.5 billion Barakah nuclear deal from the 2016 figures and conventional power deal volume in 2017 is only around $1 billion less year-on-year at $10 billion.
• The cruise ship sector had another record year in terms of ECA-supported volume – breaking the $18 billion ceiling and up around $3 billion on the previous high of 2014 when volume just tipped $15 billion, and up nearly $5 billion on 2016. On the downside, non-cruise ship supported business has dropped to a trickle – less than $1 billion – and shows little sign of recovering in the near term.
• With a 25.7% share of ECA-backed volume, the Middle East remained the most active region in 2017 – albeit down in the second half of the year from 34.2% in H1 2017. With many GCC states hit by ratings downgrades and still facing budget deficits for the first time in their recent history, state-owned borrowers across the region continue to broaden their financial toolkits in a bid to get the best debt pricing available.
• The United States was the top borrowing country in terms of total dollar ECA-backed volume – $17.7 billion spread over 26 deals – with 20% of the borrowing market. Much of the volume increase was due to European and Asian ECA support for telecoms equipment and cruise ship deals for US-based sponsors.
• In global terms, the percentage proportion of both developed market and emerging markets ECA-supported business grew in 2017 – developed markets have climbed from 42.2% in 2016 to 49.7% in 2017, and emerging markets from 32.2% to 46.2%. But with a 48% drop in global ECA-supported deal volume in 2017, those percentage increases do not reflect market growth, just a bigger share of a smaller global market.
• BNP Paribas takes the top commercial bank spot on ECA-backed lending for emerging markets in 2017, toppling Sberbank’s 2016 win – although the 2016 ranking was heavily skewed by Sberbank’s participation in the Yamal LNG financing.
• Average tranche size dropped slightly to $207.4 million in in 2017 from $209.4 million the previous year. Average ticket sizes also fell from $90.5 million in 2016 to $86.1 million. Conversely, average tenor increased slightly from 11.8 years in 2016 to 12.
• SACE provided the highest volume of cover in 2017 – $14.5 billion across 35 deals. But in terms of direct loans, the Italian ECA was vastly outgunned by JBIC with $6.3 billion. Furthermore, add together the JBIC and NEXI cover figures with direct loans, and the true export credit powerhouse that is Japan PLC becomes very apparent.
• Few surprises as to where the vast majority ECA-backed loan volume goes – 71.9% was for deals in excess of $550 million in 2017. Despite ECA attempts to better address the needs of SMEs, the reality is that only 5.4% of ECA supported loans went to deals in the $1-100 million volume range last year. Put into context, that small percentage equates to 156 deals, while the rest of the market totals 122 deals. Even allowing for the unseen volume from big-ticket ECA-backed deals that benefits SME subcontractors, and given the economic reality that big-ticket financing requires considerably more volume support, in a market that spends so much time talking about SME initiatives it is surprising that the number, if not the financial volume, of SME deals is not considerably larger than the big-ticket sector.

These are just a few of the highlights from the 28-page TXF Export Finance 2017 report. If you are a subscriber please download the full report by clicking here.

If you are not a subscriber but would like a copy of the report please contact rosie.barton@txfmedia.com