Cash & Liquidity Management
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Supporting Exports with HERMES Export Credit Guarantees

by Micha Christian Härcke, Head of Finance Division, and Yuri Paco José Vetkamp, Export Finance Specialist, CCC Machinery GmbH

German exports are on the road to recovery. Despite different expectations at present, economists agree on one thing: exports will resume growth in 2010. This indicates good prospects for small and medium enterprises (SMEs) to benefit more from the international markets – especially since the protection offered by the German’s export credit guarantees (HERMES cover) has been strategically widened in response to continued economic difficulties. One example of the opportunities this cover makes available is protection offered by a revolving finance facility cover.

The revolving HERMES – covered finance facility was found to be the best solution for CCCM and its customers.

CCC Machinery GmbH (CCCM) faces the challenge of how to finance individual short-term and recurrent business transactions with the same customer, without burdening the company’s existing credit facilities. For decades, this Hamburg based company has been exporting capital equipment, raw materials and intermediate products. CCCM focuses on markets where export-financing products are common, such as but not limited to Brazil, Indonesia, Russia, Thailand and the Philippines. Previously CCCM discounted its HERMES-covered receivables to Commerzbank on a non-recourse basis apart from 15% representing the non-covered portion. The disadvantage is that the company’s credit line is burdened with a 15% residual (corresponding to the remaining risk under the HERMES cover) for each business transaction. Even after the introduction of the second package of economic stimuli, there is still a residual risk of 5%. For this reason the aim was to devise a form of finance that could be applied to short-term payments, thus mitigating all remaining risks for the exporter and relieving pressure on the company’s own balance sheet, helping to establish and develop a long-term supply relationship with the customer concerned.