The LMA is pleased to announce the introduction of its new recommended form of single currency facility agreement for use in pre-export transactions. The PXF agreement was created in response to the increased demand from pre-export financial market practitioners, who believed that a form recommended by LMA would help improve efficiency in the PXF market by providing a common framework and language for PXF transactions. Credits are paid into the account of the supplier/contractor and/or the account of the borrower in the case of export financing prior to shipment to the account of the borrower and/or in case of recovery of payments for an export transaction on the account of the borrower. What type of PXF transaction does this apply to and at what level of investment? First, the document is designed for syndicated credit transactions, that is: A loan in which two or more establishment contracts allow loans to be granted to a specific company or group. Such a mechanism tends to be more appropriate for medium to large borrowers in need of more than £50 million. Second, the document starts from a traditional pre-export financing structure, in which a parent company is the 100% direct shareholder of the borrower to whom priority financing is made available. However, in this area of competence, various optional provisions have been put in brackets, so that the draftsman has a “menu of clauses” if these clauses prove necessary. This is not to say that the document does not need to be adapted – it must nevertheless be adapted to each transaction according to its structure and business conditions. This is consistent with other LMA documents that are supposed to provide a reasonable starting point and not seek to handle the potential complexity of any possible type of transaction. Pre-export finance (PXF) is a well-established structure that is used to finance producers of goods and raw materials (see practice note: pre-export financing – structure, parties and risks). It is a kind of commercial financing. This allows you to negotiate long-term supply contracts with producers in exchange for the provision of financial resources that we finance. It allows the producer to access financing that might not otherwise be available to him.
It is also a financing structure often used by Erste Group in the management of legal services that have exchange control rules that might not favor direct cross-border lending. . . .