Financing TradeFinancing Trade

LBBC – November 2008

Topics

• About BACBAbout BACB

• The Impact of the Credit Crunch The Impact of the Credit Crunch

• Trade Finance DynamicsTrade Finance Dynamics

• Libyan Payment SolutionsLibyan Payment Solutions

BACB’s Libyan Credentials• ““Libya in London” Libya in London”

– UK Head Office– “A”- rated & UK regulated– Associate HSBC Group– > 35 years market coverage

• ShareholdersShareholders– Libyan Foreign Bank 26.3%

• Physical Presence in LibyaPhysical Presence in Libya– Authorised office/local staff

• Libyan ClientsLibyan Clients– Most Libyan banks & Oil

companies

• Started with sub-prime US Started with sub-prime US MortgagesMortgages– Heavy losses leading to some bank

failures and widespread rescue packages

• Loss of trust between banks– Freezing up of interbank markets

– Rise in borrowing costs

• Move to wider economy– Economic slowdown

– Collapsing asset and commodity prices

– Deteriorating terms of trade

– Recession

Credit Crunch

Credit Crunch – Oil Prices

Credit Crunch – Freight Rates

Establishing Trust

Exporter/Seller Importer/Buyer

Ship and wait See the goods first

Cash in hand Advance payment

Libyan Challenges• BureaucracyBureaucracy

– Market is openingMarket is opening– New policies in place e.g. Need for Libyan partnersNew policies in place e.g. Need for Libyan partners– Legal, Accountancy and Tax issuesLegal, Accountancy and Tax issues– Change usually takes longer in practiceChange usually takes longer in practice

• ComplexityComplexity

– NOCNOC

– Oil CompaniesOil Companies

– IntermediariesIntermediaries

e.g. Oil Sector EPSAJOINT-

VENTUREWHOLLY-OWNED

Approx 30 Internationally active oil and gas majors

ENI Oil

ENI Gas

Repsol

Harouge

Waha

Zueitina

Sirte Oil Co

Ras Lanuf

Jowef

NAGECO

Nat Oilfields

Nat Oilwells

Brega

Akakus Oil Op

Zawia

Libyan Challenges • Oil Sector (continued)Oil Sector (continued)

– Arrival of the majorsArrival of the majors

– Closure of EU Procurement OfficesClosure of EU Procurement Offices

Libyan Challenges• CommunicationCommunication

– Email / Mobile communications Email / Mobile communications – Use of English in international tradeUse of English in international trade

• BondingBonding

– Wording (e.g. non-contestation clause)Wording (e.g. non-contestation clause)– Acceptable bank namesAcceptable bank names– Managing costsManaging costs

• Getting Paid !Getting Paid !

Equipment Consultancy &

Training Opportunities

Trade Solutions

Exporter/Seller Importer/Buyer

Least Secure Open Account Most Secure

Documentary Collection

Documentary Credits

Most Secure Advance Payment Least Secure

Libyan Payment Solutions

• BACB provides a broad range of Libyan payment BACB provides a broad range of Libyan payment solutions including:solutions including:

– OPEN A/COPEN A/C as paying agent

– COLLECTIONS COLLECTIONS London presentation (BACB clients)

– L/C ISSUANCEL/C ISSUANCE existing facilities for oil sector clients

– L/C CONFIRMATION L/C CONFIRMATION as correspondent of Libyan banks

– BONDINGBONDING Bid / AVP / Performance

• BACB aims to be as flexible as possibleBACB aims to be as flexible as possible

Financing TradeFinancing Trade

LBBC – November 2008