On 15 July 2023 the new changes to the OECD Arrangement on export financing come into force. The changes will provide greater flexibility in Eksfin’s offer of buyer financing. Below is an overview of what the changes mean for our customers.
Eksfin’s offer of export credits is regulated through the OECD Arrangement on Officially Supported Export Credits (“OECD Arrangement”). The changes in the terms that now come into force are related to interest rates, maturity, repayment structures and climate finance. The changes also have consequences for Eksfin’s offer of ship financing. All individual cases will continue to be subject to credit appraisal and decisions, and the OECD Arrangement provides the framework.
Loan conditions at Eksfin
Eksfin offers both a fixed interest rate (CIRR – Commercial Interest Reference Rate) and a floating interest rate on commercial terms. Read more about Eksfin’s interest rate offer .
What is CIRR?
CIRR is a fixed interest rate for various currencies that is regulated in the OECD agreement.
The CIRR consists of a government bond interest rate (base rate) for the relevant currency and maturity + a margin which from 15 July 2024 is determined quarterly (15 January, 15 April, 15 July and 15 October). Until then, the margin is 100 bps. The interest rates are updated monthly and are available on the OECD’s and Eksfin’s websites.
When is the interest rate determined?
To gain access to a loan, an application must be submitted by the buyer/borrower/bank/exporter before entering into an export contract. After receiving an application for a loan, the borrower will be informed about the regulations for determining the CIRR. The final fixed interest rate is set at the disbursement date for the loan.
Please note that this is a significant change from Eksfin’s current practice, where the CIRR is determined on the date of signing the export contract.
This means that the borrower will no longer be able to get a free option on CIRR that lasts from the signed export contract to the disbursement of the loan. From 15 July 2023, we will determine the CIRR in line with the prevailing interest rates on the disbursement date, however no later than 3 days prior to this date.
Note that separate rules apply to ships (see below).
What is the cost of the loan?
The CIRR is determined for the entire term of the loan. If the loan is repaid earlier than the agreed term, break costs may apply.
A risk premium and a commitment fee will be charged on top of the CIRR, and most often an up-front commission and other fees as payment for credit risk.
The total cost of the loan is the sum of these components.
Which tenors can be offered?
The tenor and repayment profile of the loan are regulated in the OECD Arrangement.
The maximum tenor depends on the sector the project belongs to, the type of project and the expected lifetime of the item being financed.
– For capital goods, we can offer a term of up to 15 years. This is a significant increase from the current rules of 8.5 or 10 years (“standard OECD terms”).
– For projects within renewable energy and climate technology, the max. term is now up to 22 years, but shorter for some technologies.
– For ships, the maximum term is up to 12 or 15 years. See separate brief on ship financing below.
The main rule is that loans are repaid with equal quarterly or half-yearly installments. It is possible to agree on more flexible repayment profiles within defined limits, but this must be justified based on the borrower’s needs and cash flow and requires a prior notification from Eksfin to the OECD.
Increased flexibility in ship financing
For ship financing, separate rules apply for CIRR determination and maturity. From 15 July shipowners may choose between shipping terms and standard OECD terms.
For ships, as before, we may determine the CIRR at the time of the export contract, typically when entering into a contract between the shipowner and the shipyard. The CIRR is then a free fixed interest rate option for the borrower in the period from the conclusion of the export contract until the loan is disbursed (normally upon delivery of the ship).
The maximum term for ships is 12 years and equal quarterly or half-yearly installments are assumed. This is unchanged from current practice.
Standard OECD terms
The new feature coming along with the revision of the OECD Arrangement is that Eksfin may also offer standard OECD terms for ships, if the customer so prefers.
This option only applies to ships that are built at a Norwegian yard and which will operate in international waters or on the open sea in Norwegian waters.