Building on the Export-Import Bank of the United States (EXIM) Board of Directors’ September 2020 unanimous approval of a supply chain transaction, EXIM President and Chairman Kimberly A. Reed recently announced the signing of two final agreements to make the deal – with the first-ever use of a funder guarantee structure – operative and US$50 million available to Houston-based LNG exporter Freeport LNG.
The transaction is estimated to support 200 American jobs, principally in Texas, as well as through supplier networks in Arkansas, Louisiana, Mississippi, and Oklahoma.
The groundwork for this structure was laid in September 2020, when the EXIM Board of Directors unanimously approved the renewal of EXIM’s partnership with the Private Export Funding Corporation (PEFCO) for 25 years and directed EXIM staff to draft and implement final funder guarantee agreements.
The two specific agreements signed by Chairman Reed – an Enhanced Guarantee Agreement between EXIM and PEFCO and a Tripartite Agreement between EXIM, PEFCO, and Greensill Capital – implement a 90% guarantee of a US$50 million supply chain finance facility from Greensill Capital to Freeport LNG Marketing, LLC.
“This announcement marks several firsts. From the outset of my tenure as Chairman of EXIM, I prioritised our agency’s support for US LNG exports, and today’s announcement marks EXIM’s first-ever financing for this critical domestic industry. I thank our EXIM team for their innovative work to develop an important new tool in our nation’s trade toolbox – a groundbreaking supply chain structure with funder guarantee,” said EXIM Chairman Kimberly Reed. “And this particular transaction, which will provide US$50 million in financing for Houston-based Freeport LNG, will help many US small businesses and workers across Arkansas, Louisiana, Mississippi, Oklahoma, and Texas in an industry and related supply chains that are working hard to rebound from the negative impact of COVID-19.”
Chairman Reed added, “In addition, with these agreements, we are sending a signal to the market that EXIM, working in partnership with the private sector, now has an additional tool to support US exporters and workers. The recent EXIM-PEFCO partnership renewal is making a real difference in our American supply chains – in this case, in the incredibly important US LNG sector.”
“PEFCO is delighted to partner with Greensill and EXIM on this transaction bringing capital market funded liquidity to the EXIM Supply Chain Finance space,” said PEFCO Senior Vice President Gordon Hough. “It is important to PEFCO that we are able to work with our partners to support EXIM’s rejuvenated supply chain finance program and we are eager to participate in other EXIM-supported supply chain finance transactions.”
“For many leading organisations – particularly those looking to innovate in established markets – off-the-shelf solutions and traditional approaches are simply not good enough to unlock the working capital they need to operate and grow, while at the same time protecting them against potential risks,” said Lex Greensill, Founder and CEO of Greensill Capital. “They need custom solutions to precise challenges, which is why our clients have turned to us for many years. We are proud to have worked with Freeport on this milestone transaction, which represents EXIM’s first in the US LNG industry as well as its latest innovation in supply chain finance. EXIM continues to demonstrate leadership in delivering innovative product solutions tailored to client needs, and Greensill looks forward to continuing its partnership with EXIM and PEFCO in support of US exporters and small businesses.”
“Working capital support is essential for any supplier of free on-board LNG. Greensill and EXIM were able to help us fill this crucial need with a unique structural set up that will allow Freeport and its suppliers to more efficiently provide the global market with US LNG,” said Michael Smith, Founder, Chairman, and CEO, Freeport LNG. “We are pleased to be a part of this innovative transaction that will support US jobs and the energy transition around the world.”