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2009 Budget measures: EDC’s implementation

BCAP Committee meetingToronto, April 2nd, 2009

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Agenda

• EDC’s New powers

• Principles governing implementation of new powers

• Actions Receivables Insurance

Surety Bonding

Financing

• Discussion and Next steps

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EDC’s Powers under the Budget

• $350 mln additional Capital

• Limits of paid in Capital increased from $1.5 bln to $3 bln

• Contingent liability limits increased from $30 bln to $45 bln

• Canada account ceiling increased from $13 bln to $20 bln

• Domestic powers approved for 2 years Ability to support domestic trade

• BCAP initiative to work in collaboration with BDC and the private sector financial institutions to increase credit availability

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Implementation of New PowersGoverning Principles

• EDC provides complementary capacity to banks and insurers : It does not displace them Risk-sharing is a required condition

• Private sector financial institutions retain their relationships with companies.

• EDC continues to operate within its areas of competence Trade-related; excludes a few sectors such as real estate,

wholesale and retail distribution…

• Support is on commercial terms

• Support is to viable counterparties

• Equity powers not changed by the budget

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• Trade finance and risk management of exports and investment remain EDC’s primary long-term focus and competency.

• EDC adds to the domestic market in 3 broad areas:

re-insurance to provide additional capacity to credit insurers.

re-insurance and guarantees to provide additional capacity to the surety industry;

as a lender to domestic borrowers facing challenges raising sufficient credit by way of guarantees to financial institutions and as a direct lender

Implementation of New PowersActions

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Credit InsuranceDomestic Buyer Coverage

• EDC is negotiating re-insurance agreements with each private sector insurer active in the Canadian market.

• Guiding principles : Help private insurers continue to provide coverage to their

clients; share risk to cover gaps.

Private capacity must always be present. EDC’s exposure should not be higher than that of private insurer.

EDC does not provide direct coverage of domestic risks - except in exceptional circumstances such as in the auto sector

• Companies should approach their insurance company or broker

• EDC’s coverage of export receivables does not change

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Surety Bondingin the Domestic Market

• In general, there appears to be adequate capacity in the domestic market today

this may change with the number of infrastructure projects being planned

• EDC will leverage existing agreements with sureties, banks and customers to provide additional capacity if required

New, incremental commitments only, not existing exposure Commitment related to contract performance; EDC will not

consider bid, reclamation, utility or regulatory bonds. No regulation tests, most sectors

• Companies should approach their existing surety provider(s)

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Domestic BondingPSG and FXG

• Expand the PSG and FXG programs with Banks and other Financial Institutions in the domestic space

• No regulations test, in most sectors Will be careful not to distort market with potential shift from

surety instruments to demand instruments

• Similar requirements to surety New commitments only

• Must be existing bank customer

• Companies should approach their existing financial institution

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Domestic Financing EDC is “part of the solution” rather than “the solution”

• Expand availability of direct financing in the domestic space

Remain within EDC’s areas of competency Act as a direct lender or a guarantor Leverage private participation

• When will EDC get involved ? New Business and regular Renewal Business

EDC will consider participating, with particular regard for the benefits to the customer

“Sudden withdrawal” EDC will consider replacing a departing foreign lender

Facilities restructuring no “taking out” existing lenders. Everybody needs to remain

involved

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Domestic FinancingExport Guarantee Program

• Expand the EGP into the domestic space Existing program, ensures optimal time to market

Documentation under review for any required changes By definition a risk-sharing program with the private sector

No longer the need for a “regulations” test

• Companies should approach their existing Financial Institution

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• Leverage relationships with the financial industry to deliver needed capacity to Canadian companies

• Principles Act in response to and alongside Financial Institutions

EDC does not aim to be largest single lender; rather intent is to provide “top up” capacity to facilities

Anchor or sole lender only on exception basis

• Companies should approach their Financial Institution

Domestic FinancingBCAP

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• Key areas for continued discussion Freeing up working capital under EDC guarantees

Treatment of Credit Insurance in margining formulas

Maintenance of capacity, and redeployment of “relieved” capacity

• Next steps Bilateral consultations to continue in order to finalize process

Keep monitoring and adjust through dialogue

Discussion and next steps