CIRR-finance now also available for Dutch exporters.
What is CIRR?
Since April 2018, your bank can apply for CIRR financing through which your borrower abroad can obtain a credit at a recognized fixed interest (CIRR) rate. This arrangement is an agreement between the Dutch Ministry of Finance and the national promotional banks BNG Bank and NWB Bank (these banks being the “CIRR funders”).
What is the advantage?
As agreed within the OECD, CIRR is a low fixed (minimum) rate which applies for export finance loans. Dutch exporters find this product particularly interesting because it offers foreign buyers with a possibility to obtain financing with a recognized fixed rate. As a consequence, the buyer can calculate its total financing costs beforehand.
How is the process organised?
The process to apply for CIRR finance can be summarized as follows:
- The applying export bank needs to have a rating, which is at least investment grade (BBB-).
- Through the Atradius DSB application form “Buyer Credit Insurance Policy”, the export bank applies for CIRR financing. The CIRR funders will be informed by Atradius DSB.
- Atradius DSB will issue to the export bank a promise of cover for the Buyer Credit Insurance Policy as well as for the CIRR financing.
- As of the date that all conditions precedent of the export loan have been fulfilled,
- the following documents will be signed on the same day (“Effective Date”):
- The refinancing agreement between each of the CIRR funders and export bank, in which the CIRR funders will formalize the applicable CIRR rate
- The deed of pledge regarding the export loan, and the recourse agreement, between the export bank and Atradius DSB.
- The CIRR guarantee that will be issued by Atradius DSB to the CIRR funders.
- The Buyer Credit Insurance Policy that will be issued by Atradius DSB to the export bank.
- The CIRR funders provide the export bank with CIRR financing (through the refinancing agreement) in accordance with a pre-agreed drawdown schedule, irrespective of any future changes to a drawdown schedule under the export loan (e.g. due to delays or other circumstances).
- In the refinancing agreement, the CIRR rate will be equal to CIRR minus 35 bps (EUR) or CIRR minus 20 bps (USD), increased with a potential forward premium that may apply if drawdowns take place after the Effective Date. The total CIRR rate is subject to the rate not being negative and no adverse market circumstances prevailing in respect to the CIRR funders.
- The export bank can, at a running premium of 20 bps, lock in the rate of the CIRR financing prior to the Effective Date up to a period of 120 days. I.e. if such period of 120 days expires before the Effective Date has occurred, the locked in rate will become null and void. At such moment in time, the borrower can lock in the CIRR rate for another period of maximum 120 days.
- No commitment fee or arrangement fee will be charged by the CIRR funders
- Notwithstanding any (event of) default in respect of any payment by the borrower under the export loan, the export bank is required to continue making payments to each of the CIRR funders under the refinancing agreement (no suspension rights).
- Any (i) deviation from the drawdown scheme by the export bank under the refinancing agreement or (ii) any early (p)repayment by the export bank under the refinance agreement , is subject to breakage costs (make whole).
- The Atradius DSB promise of cover for CIRR financing has a duration of 6 months. The first roll-over of this promise of cover for an additional 6 months occurs automatically, the second roll-over will be subject to internal approval within Atradius DSB.