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									 Vol. 419 No. 29,431                                                                    Monday March 22, 1999



                         The Journal of Commerce
                              A Special Report By Richard Barovick


        Exporters scrambling for financing

When foreign buyers of U.S.             showcase for 15 to 20 football fields   sells to dealers and end-users, some
construction equipment pour into        worth of displays, and enough hotel     large but mostly medium-size and
Las Vegas for the big Conexpo trade     rooms for that huge crowd.              smaller buyers.
show this week, they are expected to
have one urgent piece of business on    This year, 1,736 exhibitors have        At Mack Truck Sales of South
their minds: How can they put           signed up, and with export sales        Florida, a dealer and exporter,
together a financing package in         starting to taper off, the Las Vegas    owner Fernando Pernas stresses the
these days of global turmoil and        showcase is a crucial opportunity to    same theme. Finance is more
lenders caution?                       keep their products before              important than ever. Even Korean
                                        prospective buyers. Major               companies that are hurting offer
The answer may determine whether        manufacturers such as Caterpiller,      competitive credit, he said.
this top U.S. export sector can         Case and Komatsu will be
maintain its growth pace or have to     displaying their wares along with       Exports accounted for about 55% of
adjust to flatter sales for a while.    hundreds of smaller and mid-size        Miami-based Mack Truck Sales
                                        companies from the United States,       $96 million in business last year,
Show keeps on growing                   Europe and Asia.                        Mr. Pernas noted. He used the Ex-
                                                                                Im Bank insurance program recently
                                        Important sales Tool                    in conjunction with a loan from
Those worries, however, arent                                                  Barclays bank in Miami to sell
likely to dampen enthusiasm for the     Finance has become even more of a       trucks to Ecuador. He also uses
show itself, among the biggest in the   sales tool in the current               private credit insurance occasionally
world in the equipment business. In     environment. In Miami, Frank            and several times has used the so-
fact, the Milwaukee-based               Maestri, head of F.W. Maestri Co.,      called forfait market, a private
Construction Industry                   and exporter of used construction       global trade finance network.
Manufacturers Association, one of       equipment, said he could do four
its major sponsors, concluded           times as much business if it could      In that network, made up of banks,
several years ago that no other U.S.    put more financial packages             the risk is usually covered through a
city could even house the event.        together.                               bank guarantee in the buyers
When a show gets this big, you                                                 market. But, reports Mr. Pernas,
run out of options, said Steve         Mr. Maestris firm, in business         its been hard lately to get a bank
Biersdorf, international marketing      since 1960, recently got Export-        guarantee at a reasonable price.
manager.                                Import Bank insurance to cover the
                                        sale of Terex cranes to Sadeven         The Miami-based Mack Truck
About 120,000 dealers, construction     industries in Venezuela. It is the     dealer often sells to mining and
contractors, exporters and importers    only recent deal in which weve         road-building companies that are
(20,000 of them from outside the        managed to use ex-Im Bank support,      funded by World Bank and Inter-
United States) turn up every three      but it took a long time to put it all   American Development Bank credit.
years for an event that requires a      together, he said. His company          Many customers fly to Miami to
 2 Journal Of Commerce                 Monday March 22, 1999



buy their equipment.                      oil prices down, the Venezuela and
                                          Ecuador markets have been hit. We        Two strategies possible
We get a lot of repeat business and      have to work harder than ever on the
a steady flow of visitors, but, with      finance side, he said.
Mr. Biersdorf of the Construction         Ex-Im Bank, he said.                    become fairly spotty. Forfaiters,
Industry Manufacturers Association                                                 mostly specialized units of
said the softening in the export          The Export-Import Bank, whose            commercial banks, invest in trade
market will probably lead to greater      medium-term insurance program            debt and then buy and sell the
exporter reliance on two strategies.      (with typical repayment terms of         obligations in a secondary market.
One is to increase the use of rental      five years) is used primarily to cover   The majority of transactions involve
and leasing arrangements. The other       Latin American buyers, recently          medium-term repayment terms, but
is to expand the sales of used            closed 11 construction equipment         some deals are of a short-term
equipment.                                deals, six of them supported by the      character.
                                          insurance facility.
Last year was actually a good year       Hard to obtain for Brazil                Typically, forfait deals are targeted
for exports. In the third quarter, we                                              at the emerging markets and finance
still saw 2.5% growth. But its           Private trade credit insurance, on the   the sale of capital equipment.
starting to taper off a bit, Mr.         other hand, is hard to obtain for        Construction machinery is a
Biersdorf noted. On the other            Brazil but is still available for        popular product for this market,
hand, we may have run through the         Argentina and Mexico, major              said Jack Moran, a principal in
worst in Southeast Asia.                 markets for this equipment.              British-American Forfaiting in St.
                                                                                   Louis, which helps U.S. exporters
In response, major manufacturers          Even in financially strapped             use this financing tool.
such as Caterpillar and Komatsu are       Indonesia, a package of private
working with their distributors in        credit insurance was put together        For the moment, however, its
Latin America to arrange leasing          recently for mining equipment by         pretty tight out there in many
and rental. Rental is likely to          NaviTrade Structured Finance in          places, he said. Korea and
become a necessary option, the           Niwot, Colo., a Denver suburb.           Thailand are looking a little better,
CIMA official said.                       Brent Hoots, managing director of        and deals can still be done in
                                          NaviTrade, an arranger, explained        Argentina, Colombia, Peru and
Meanwhile, two of the main                that he was able to get coverage         Chile. And Mexico too, but the
resources for financing construction      from a private underwriter by            rates are up, reflecting the impact of
equipment exports - commercial            throwing the Indonesian sale into a      lower oil prices. A lot of new
banks and private credit insurers -       larger pool of export business.          exporters are seeking cover, but its
remain active though more cautious                                                 hard to place.
toward the market.                        We got support for $2.2 million of
                                          transactions with the Indonesian
Robert Pelka, vice president for          buyer, which makes it possible for
export finance at Norwest Bank in         my client to offer 360-day open
Minneapolis, has been doing a             account terms, he noted. You           Reprinted with permission from the
steady business in the construction       would think thats impossible in         Journal of Commerce.
sector. Mr. Pelka recently closed a       todays market, but we achieved it
deal in Honduras, using private           by including the Indonesian
credit insurance to cover most of the     business in a pool of transactions
risk.                                     that will total more than $15 million
                                          during the next year.
And we have new facilities in
place for six exporters selling to a      But, while banks and private credit
single Argentine buyer under a            insurers remain active (though
master guarantee agreement with           cautious), the forfait market has

								
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