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Cover for a supplier credit linked to the export of Public Works equipment to South Africa
Structuring of a credit insurance solution covering non-payment by a distributor of Public Works equipment in South Africa under a five-year supplier credit. The supplier leases the equipment to local companies.
The AU Group team
François Delteil
Co-Head of AU Group Structured Solutions & Political Risks
Challenge addressed
To find a five-year credit insurance solution for a credit risk on a distributor in Southern Africa.
Key challenge: Securing medium-term credit insurance cover in Africa for a distribution company.
- Role
- Mitigaging insurers' risk assessement by detailing the possibilities of recovering the equipment in the event of a claim and by analysing the debtor's shareholding structure.
- Sector
- Public Works equipment
The proposed solution
AU Group supported a company manufacturing Public Works equipment and selling it worldwide.
The commercial contract concerned the export of Public Works equipment to a distributor, who in turn leased it to local African companies (mining and construction). The contract included a five-year supplier credit, enabling the distributor to amortise the cost of the equipment through rental income.
AU Group succeeded in convincing several insurers to provide five-year cover for a transaction involving a medium-quality credit risk, based on the following arguments:
The insured’s long-standing experience in Africa, including in supplier credits
The possibility of recovering the equipment in the event of non-payment
The dynamic business activity of the end client, making insolvency unlikely
Our expert's opinion
In-depth discussions with the client regarding its contract, the related securities and its experience in the country enabled insurers to agree to provide medium-term cover in a region where they are usually very selective.
François Delteil, Co-Head of AU Group Structured Solutions & Political Risks
Our role and contribution
Knowledge of the market and of insurers likely to support the transaction
Development of arguments to mitigate a medium-quality credit risk
Drafting of a policy wording tailored to the transaction, acceptable to all insurers and allowing for bank delegation or co-insurance
Negotiation of a premium payable over five years, in line with the payment schedule of the financed equipment
Results
Premium spread over
5 years
to better match the transaction's cash flow
Syndication of insurers
around a bespoke AU Group policy wording
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