Case study

We helped Houlder to expand its market and its workforce

UK Export Finance helped London-based design and engineering company Houlder to fulfil a major project management contract in Libya.

Houlder

Houlder turned to UK Export Finance (UKEF) for help in 2012 when it won a three-year contract to project manage the construction of a floating storage and offloading vessel off the coast of Libya. The company was facing a challenge to manage the risks involved, potentially leaving it short of working capital. The company used three UKEF products (Bond Support Scheme, Bond Insurance Policy and Export Insurance Policy) to protect its cash-flow and give it enough working capital to fund the contract.

Through providing support like this, we are contributing to increasing the UK’s exports and making the UK more competitive.

Biggest contract

The client, an oil and gas company, asked Houlder for an advance payment bond worth 10% of the contract value and a smaller performance bond. The company’s bank issued the bonds, but asked for 100% cash cover to secure them. Houlder asked UKEF for help.

Rupert Hare, Chief Executive Officer at Houlder said:

This Libyan contract is our biggest in terms of value. A company like ours wouldn’t normally need to provide a bond this big, but the length of the contract and its location meant that large bonds were a must. We needed funds to mobilise staff to start the work. After bidding for the job in 2011 we looked at several routes for credit and realised that UKEF offered the best solutions.

UKEF used its Bond Support Scheme to guarantee 80% of Houlder’s bonds and the company’s bank guaranteed the remaining 20%.Once the bonds were issued, UKEF issued two Bond Insurance Policies for the advance payment and performance bonds. Bond Insurance Policies cover exporters against unfair calls on bonds, as well as fair calls caused by certain political events. UKEF also put in place an Export Insurance Policy covering the company for 95% of the amount Houlder deemed to be at risk of non-payment.

This arrangement gave Houlder enough working capital to fund the contract and work started on the vessel design in November 2012. The company has already employed 12 new staff to support the project and expects to take on several more in the next year.

Rupert Hare said:

As with any SME, our cash flow is always an issue. But we found that the help from UKEF and our bank really helped us to move forward. Without this help, we would have been limited to looking at smaller opportunities that were closer to home. I advise companies to talk to UKEF as soon as possible and find out what help they can offer.

Bond Support Scheme: more information

Under the Bond Support Scheme we provide a partial guarantee to a bank where it issues a bond in respect of a UK export contract. This protects the bank against the risk of the exporter being unable to repay them if a call is made on the bond by the beneficiary. The bank can then issue the bond even if it doesn’t have sufficient risk appetite. With advance payment and progress payment bonds, this may result in more working capital being available for the exporter.

Criteria for eligibility are:

  • UK-based exporter
  • Buyer based overseas
  • Export goods and services need a minimum of 20% UK content
  • We can typically guarantee up to 80% of the value of the bond or export contract working capital facility

Read the full guide to the Bond Support Scheme, including how to apply.

Export Insurance Policy: more information

The Export Insurance Policy insures an exporter against the risk of not being paid under an export contract or of not being able to recover the costs of performing that contract because of certain events which prevent its performance or lead to its termination.

Criteria for eligibility are:

  • the exporter must be carrying on business in the UK
  • the buyer must carry on business overseas
  • if the duration of the contract is less than 2 years, we are unable to offer cover if the buyer is in a country belonging to the European Union, or in certain other high income countries (Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland and the United States of America) - this restriction does not currently apply to Greece
  • the exporter must demonstrate an inability to obtain credit insurance from the commercial market

Read the full guide to the Export Insurance Policy, including how to apply.

Bond Insurance Policy: more information

A bond insurance policy is for UK exporters, where a UK bank issues a bond on their behalf to an overseas buyer, or a counter-guarantee to a bank in the buyer’s country, as a condition of an export contract.

The policy protects the exporter against loss caused by:

  • the unfair calling of the bond (or any related counter-guarantee)
  • the fair calling of the bond (and any related counter-guarantee) due to certain political events

Criteria for eligibility are:

  • the exporter must be carrying on business in the UK
  • the buyer must be in a country outside the UK
  • the bond must not be a tender or bid bond or a bond given for contract payments that are aid funded by the UK government

Read the full guide to the Bond Insurance Policy, including how to apply.

Contact an Export Finance Adviser in your region or alternatively call:

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Published 29 April 2014