U.K. Firms Get Pandemic Support From Agency With Great War Roots
(Bloomberg) -- U.K. companies pummeled for nearly a year by pandemic shutdowns are turning to a century-old government agency with roots in the country’s drive to rebuild trade after the Great War to help them raise funds.
Subsea 7 Ltd. on Thursday sealed a $500 million loan guaranteed by U.K. Export Finance, a British official body that backs efforts by firms to line up funding for exports.
The oilfield services company, and airlines British Airways Plc and EasyJet Plc, are among five firms that have secured a combined 6.3 billion pounds ($8.93 billion) of funding with UKEF support since the pandemic began. The agency’s Export Development Guarantee program allows exporters to access loans for up to five years to provide working capital and funding for their businesses.
UKEF-Guaranteed Bank Loans
Alongside massive fiscal stimulus, export financing aid is another device in the government’s toolbox to help companies ride out a slump that caused the British economy to shrink about 10% in 2020. UKEF traces its roots to 1919 when the U.K. set up the world’s first export credit agency to help repair the damage done to trade by World War One.
“We are certainly seeing more companies taking advantage of the scheme since last year,” said Jahnavi Ramachandran, a London-based partner with law firm Herbert Smith Freehills, who advised on the Easyjet deal. “Government-backed financing tends to be more attractive.”
EasyJet signed a $1.87 billion facility at the start of the year underwritten by a syndicate of banks and partially backed by UKEF. British Airways said this week that it plans to draw down a 2 billion-pound loan after sealing an agreement with the agency which is partially backing the facility.
“The successful issue of these guarantees has led to a significant increase in interest on the EDG product and there is a growing pipeline of potential transactions across a range of UK exporting sectors,” a spokesperson for UKEF said by email. The EDG program has helped back 6.93 billion pounds of funding deals for companies since its 2019 launch.
UKEF’s guarantees mechanism echoes the Bank of England’s temporary Covid Corporate Financing Facility, or CCFF, set up in March 2020, which offers short-term commercial paper debt to tide firms through cash flow shortages.
“Unlike the CCFF program, the EDG scheme has more generally been available to borrowers,” said Ramachandran.
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