Facilitating Secure Export Financing: From Due Diligence to Execution

Case Details

Buyer/Borrower location: Kingdom of Saudi Arabia (KSA)

Buyer/borrower type: Private corporate

Transaction/Loan amount: EUR5.4 million

Payment terms: 5-year repayment period

Sector: Manufacturing

Background

A European bank, newly established to finance ECA-backed transactions, was requested to provide a buyer credit facility to a Saudi corporate covering the purchase of water bottling equipment from a German exporter.

With ambitions to fill a gap for supporting smaller ticket cross-border financing, the bank required local expertise in Saudi Arabia to navigate the associated legal and regulatory complexities.

The Challenges

1. Absence of Local Presence
   Without a branch or representative office in the Kingdom of Saudi Arabia, the bank had  a limited insight into local laws, practices, and market conditions.
2. Legal and Structural Assurance
   Ensuring that the transaction was structured correctly and that the loan agreement was legally enforceable under local regulations required in-depth local legal knowledge.
3. Cross-Jurisdiction Coordination
   Managing due diligence and legal documentation across different regulatory frameworks increased the complexity of the transaction, necessitating careful coordination between parties in multiple jurisdictions.

Methodology & Process

To address these challenges, our team conducted a series of investigations and reviews:

1. Due Diligence Procedures
   Our local experts undertook comprehensive due diligence on both the primary borrower and the Saudi corporate entity providing payment security.
2. Documentation and Legal Review
   A thorough review of the loan agreement was performed to ensure full compliance with both international standards and local legal requirements. In addition, tailored security measures were drafted and supported by a formal legal opinion regarding enforceability.
3. Stakeholder Coordination
   The process included managing the execution of necessary documentation. This involved securing signatures on the loan agreement and Promissory Note, as well as ensuring that all conditions precedent were properly addressed before finalisation and drawdown.

Outcome & Decision

The collaborative and methodical approach implemented by the ExpoFin team resulted in a streamlined and efficient process that met the bank’s requirements in a cost-effective manner. The due diligence and legal reviews provided the bank with the assurance needed to move forward with the successful conclusion of the deal, establishing a solid framework for future cross-border transactions.

Key Takeaways

1. Importance of Local Expertise
   The case underscores the need for locally licensed legal experts when operating in markets where direct representation is absent.
2. Rigorous Due Diligence
   Detailed financial and legal investigations are essential for mitigating risk and ensuring transaction integrity.
3. Efficient Documentation Processes
   A coordinated approach to managing documentation and stakeholder engagements contributes to timely and cost-effective transaction execution.
4. Framework for Future Transactions
   The successful completion of this deal provides a validated approach for addressing similar cross-border financing challenges in the future.