Press Releases

Hermes cover: Revolving cover of finance credits

14 December 2007

• Product innovation facilitates financing
• Cover of financing for regular supplies to a foreign buyer
• Simple and efficient handling with a revolving limit
• Conditions for Finance Credit Cover now also for short-term business

The Revolving Finance Credit Cover of short-term export transactions was introduced as at 1st January 2008. The objective is to ease the burden on the exporters' balance sheets. The new product is primarily intended for banks and supplements the Federal Government's range of export credit insurance products. The decision to introduce this new type of cover was taken by the Interministerial Committee at its meeting on 13th December 2007.

"Revolving Buyer Credit Cover insures receivables resulting from multiple transactions at short credit terms" explains Karsten Großimlinghaus, Head of the Department Product Management for the State Export Credit Guarantees. It protects the financing of a German exporter's regular supplies to a specific foreign business partner. The credit periods must not exceed 360 days, in exceptional cases 720 days. "It was important to us to create an attractive and perfectly fitting insurance product which covers the financing of short-term export transactions."

The bank finances the export business a German exporter transacts with a specific foreign buyer and at the same time takes out Hermes Cover for that credit, in this case Revolving Finance Credit Cover. The revolving nature of this type of cover results from continuous insurance of successive deliveries of goods or services. For that the Federal Government approves a limit for the foreign buyer and borrower.

Revolving Buyer Credit Cover aims at providing fast and efficient insurance of the separate partial deliveries. Therefore cover already commences on the date of shipment and the exporter can rely on a disbursement of the credit by the bank. The exporter reports each shipment to the bank and receives payment under the finance credit, the amount of which will then be booked to the limit. As soon as the foreign buyer has effected payment to the bank the amount booked to the ceiling is reduced accordingly.

Hermes Cover is granted in favour of the bank providing the finance credit. Hence, if the foreign buyer defaults on a payment, the bank is entitled to assert a claim. The conditions for finance credits such as the uninsured percentage of 5 per cent and the shorter grace and claims handling periods will be applied to the new Revolving Buyer Credit Cover. "Cover for banks at short finance credit terms closes a gap in the cover offered by the Federal Republic so far", explains Mr Großimlinghaus.

State cover is attractive for the banks since the risk of not being indemnified is actually very small. In particular, the exporters will benefit from the new Revolving Finance Credit Cover: The regular payments after each shipment directly ease the burden on the credit line. Besides, they need not fear any negative effect on their company rating as it would be the case if the accounts receivable were sold. In addition, the financing bank undertakes not to terminate the credit agreement without the consent of the Federal Republic.

The premium payable for Revolving Buyer Credit Cover corresponds to the rates payable for short-term specific cover. To this the application fee and the annual prolongation fee have to be added. The premium will be charged to the bank on the basis of the monthly disbursement notifications and has to be paid by the bank.

Contact:
Euler Hermes Kreditversicherungs-AG, Exportkreditgarantien des Bundes,
Ruth Bartonek, Press spokeswoman, +49 (0) 40 / 88 34-92 41, ruth.bartonek(at)eulerhermes.com
Internet: www.agaportal.de