Online panel on publicly supported financing options for international company projects

With the participation of Cesce, COFIDES and ICO

Spanish companies can resort to various means to finance their international expansion projects, but they are not always aware of all the existing ones.

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Representatives of three entities will tell us in detail about the various public financing options: 

 

Ana Cebrian, Deputy Director of the Business Development Area of ​​COFIDES
Alfonso Noriega, director of Institutional Relations and Communication of the ICO, Official Credit Institute
Irene Ciria, senior analyst in the SME Department at Cesce

 

 

We are in a complicated context, due to covid-19, do you think it is a good time for Spanish companies to think about carrying out investment projects abroad? 

 

Irene Ciria: “We understand that the foreign sector is key to getting out of the current crisis; It has been, it has happened in previous moments. At Cesce our vocation is to provide the greatest support to exporters so that they can continue with their business. In fact, from the account of the State of Cesce, which is where I am, some extraordinary measures have been taken in the face of this economic crisis. Some of these measures: the creation of a currency line with special characteristics, the Covid Line; an expansion of the line of guarantees and working capital up to 500 million euros. The objective is that SMEs and non-listed companies that are internationalized or in the process of internationalization can benefit from them. Fundamentally we try to support through guarantees for issuers, guarantees for exporters and circulating credits. 

 

We understand that it is an absolutely essential tool to promote these types of companies abroad that now more than ever need to either remain in the foreign market or launch themselves into that international market to maintain activity.

 

Another type of measures that we have taken are lines of guarantees for large companies; the restructuring of some operations has been made more flexible; We have also covered short-term export operations in EU and OECD countries. By Cesce We are putting all our efforts so that companies go abroad". 

 

Alfonso Noriega: "I think Spanish companies have shown strength and a lot of resilience during 2020, relying on a wide range of measures that have been adopted by the Government, measures that have been managed by the ICO, such as the ICO Covid guarantee line, of up to 140.000 million euros. 

 

We have been able to see how Spanish companies in countries where the impact of the pandemic has been less, such as China, have performed well in exports. Between January and November 2020 it reached a record figure, a growth of close to 20% above 7.000 million euros. 

 

I believe that as traditional markets recover during 2021 and with the deployment of the vaccine we will see how the foreign sector will behave as a true engine of the economy. This foreign sector is going to have a very relevant role, boosting productivity. 

 

From the ICO, of course, measures have been carried out and different iInstruments designed to support and help companies have sufficient liquidity to face the pandemic and to support their activity internationally. 

 

In fact, 2020 was a record year for the ICO in terms of direct international financing to companies; it grew by 75% to over 1.100 billion euros to support projects of all kinds: sustainability, infrastructure, renewable energy... this also demonstrates the ability of companies to continue deploying projects.” 

 

Ana Cebrián: “I think soIt's a good time but it depends on the sector and the type of company. I am talking about an investment project, which is what COFIDES finances. What do we see with these projects? That they are moving forward, that the companies that had greater geographical diversification and local presence are the ones that are best supporting the covid crisis and evidently there are sectors that are more or less affected. We all know that there are sectors such as tourism or hospitality that are most affected and then there are sectors that benefit most, such as health and technology. 

 

In the first months of the pandemic we did observe a certain paralysis in the progress of projects because companies were very focused on reviewing their income statements, seeing what was happening globally, how the pandemic was evolving, very focused on managing their treasury, liquidity. , but once this first phase was over and as this situation dragged on, companies have clearly resumed their investment projects after the summer. Proof of this is the bulging operations pipeline. Right now we are studying projects in very diverse sectors: Infrastructure, energy, sustainability, connectivity, technology, agri-food… even in the hardest-hit sectors, progress is being made on these projects. They may have slowed down, but they are still moving forward. 

 

It is true that the limitations when traveling also make it difficult for the projects to advance, but nevertheless they continue forward. What internationalization has highlighted is the importance of having a local presence, even more so now with these travel limitations.

 

I believe that the projects will continue and there COFIDES, and Cesce and ICO will play a very important supporting role.” 

 

Companies do not always have sufficient own resources to carry out these investments; In addition to resorting to the banking sector, another means of financing is public, which is what we are going to detail today on this set. Do you think that Spanish companies know your activity and that they can turn to you or do they still think only of the bank's traditional formula to seek funds for their projects? What are the advantages of using public financing instead of private financing? 

 

Alfonso Noriega: “I think the ICO was known, but last year with the launch of the guarantee lines it has been on everyone's lips. The ICO has different natures: it is a credit institution and a financial agent of the State and an instrument of economic policy. This management of the guarantee lines has been carried out as a financial agent of the State, on behalf of the Ministry of Economic Affairs and Digital Transformation, in public-private collaboration with financial entities. On the two lines of guarantees that have been approved for 140.000 million euros, today more than 970.0070 financing operations have been guaranteed, which have made it possible to mobilize nearly 116.000 million euros. 

 

I would not distinguish so much between public and private financing, In the case of the ICO, public-private collaboration is essential. The ICO has different instruments and always carries them out with the private sector. For example, in the mediation lines what it does is collaborate with the banking sector, which carries out the risk analysis. To access this financing, companies have to go to financial companies and request it. When the ICO begins to finance directly it is for larger operations, greater than 10, 12 million euros, and it always does so with other financial entities; The ICO is there to complement the private financial sector and to support the development of business activity both in Spain and internationally.

 

The ICO also operates as a traditional bank financier and also the financial markets, acquiring, for example, corporate bonds and promissory notes. In 2020, a new bond and promissory note subscription program was launched in the alternative fixed income market that has allowed liquidity to be injected, not only through banking channels but also through the markets.

 

It also operates in the field of private equity and venture capital. through three funds, FOND-ICO Global, FOND-ICO Pyme and FOND-ICO Infraestructuras, which allow, in collaboration with investment fund managers, to channel resources towards Spanish companies, SMEs, startups and promote entrepreneurship. 

 

In short, the ICO has a wide range of financial solutions for different types of companies, for different sizes, sectors and not only of a banking nature.” 

 

Ana Cebrián: “I believe that companies know the instruments that the administration makes available to them for internationalization projects. Maybe they don't know exactly everything we can do, which is why communication work like this is important. The issue of public-private collaboration is important; COFIDES will be additional to what banking entities can offer. For companies it is important to diversify their sources of financing, to have banks but at the same time to have institutional support, through the capital markets, there are bonds, there are debt funds, equity funds, there are many players. 

 

And when it comes to institutions like COFIDES, the differentiating character it presents is, first, ands institutional support, beyond financial support. COFIDES manages public funds, in such a way that when a company is going to carry out a project abroad it has the support of the State, and this is evident on a practical level, in the resolution of problems.

 

And on the other hand, although we offer debt instruments we also have capital instruments, subordinated debt, the instruments have a participatory nature; and It's a long-term commitment.When we support a company it will be long term and we will accompany it in its internationalization process and as it opens new markets or expands in the markets in which it is present. 

 

I would also highlight that at these times when companies are ensuring liquidity and now we talk a lot about solvency, it is important to know that COFIDES operates through both debt and equity instruments. We favor it in some way because we can also not only finance future investments but if an investment project has been carried out and has been financed by the company we can consider past investments. It is also a way to provide liquidity. 

 

And in new projects we adapt to the needs of the specific project, if they need long grace periods, if they need more participatory instruments because they want us to be in the capital. 

 

And we work with third parties; When we go to project finance structures, we can enter and not be the only financier, in large infrastructure projects we often go to equity. 

 

And the ability to mobilize resources: We have maximum exposure limits in projects but we mobilize resources from other sources, apart from our shareholders, or from international banks with which we may have a relationship, we are part of the European Development Financial Institution. That is, we can provide a complete financing package.” 

 

 

Irene Ciria: “We understand that the export sector is key to overcoming the current crisis; this has been the case before. At Cesce, our aim is to provide the greatest possible support to exporters so they can continue their businesses.”

 

 

Irene Ciria: “We as such are not financiers, we do provide coverage either to financing banks or to the exporters themselves in their internationalization operations. People know us for large projects but we not only cover large projects but also many very small operations and especially in the current situation we are very focused on SMEs doing a lot of dissemination work; At the end of the day, our business fabric is made up of SMEs. As a practical example, the Covid lines, what we do is support with coverage the financing bank that finances the working capital of that company. These lines have allowed us to make ourselves known to many small companies that until now were unaware of Cesce's role. 

 

Although like other institutions we collaborate closely and necessarily with banking entities, we consider that We are an absolutely public support that does not enter into competition with the market. "We are going to enter into those operations that, whether due to a very high risk, to very complicated countries, or to a very high price of the operation, the private market does not enter." 

 

What specific lines or guarantees do you have in ICO for international projects?

 

Alfonso Noriega: “The ICO has a wide range of instruments to finance its activity internationally. Has the ICO Mediation lines, are lines that offer entrepreneurs and the self-employed the possibility of financing working capital, anticipating their invoices, financing their exports, investments, and acquisitions abroad. And these lines are channeled through banking. The ICO raises resources through the markets and channels them to companies. In this channeling, it relies on banks and signs agreements with them. Banks carry out risk analyzes of companies and decide to grant this financing. They are usually for financing needs below 12 million euros per year per company. 

 

When we talk about larger projects, from 10 million, the ICO begins to finance directly, either in a syndicated way, bilaterally, always with the participation of banks, also finances project finance, it is involved in all types of financing. 

 

The great advantages that ICO offers, as COFIDES commented, is betting on long terms, access to currencies, and of course institutional support, It is still a public credit institution. I insist, the ICO always goes with other financial entities, it is never the largest financier but rather it does not finance more than the most. 

 

ICO also offers financing with mediation but relying on credit institutions and other national banks in third markets. What the ICO does is fund a bank abroad so that that bank in turn finances an operation or a project of a Spanish company. We have a network of contacts and partners mainly in Latin America, agreements with 14 national banks, multilateral banks, etc. Last year, new agreements were signed with delegations of Spanish banks such as BBVA or Banco Sabadell that have allowed us to deploy more than 600 million euros of financing in Latin America and as a whole this instrument has allowed us to mobilize more than 2.000 million euros. 

 

And in terms of guarantees, the ICO has own endorsements. In 2020 they have had quite significant growth; have doubled compared to 2019. And here what it is about is offering guarantees to guarantee the concepts required in the international bidding documents. The ICO comes to offer guarantees to a bank or guarantees are offered directly to companies that need it, always together with other guarantors." 

 

Alfonso Noriega: “I believe that Spanish companies have demonstrated strength and great resilience during 2020, relying on a wide range of measures adopted by the Government.”

 

 

What are the most common operations you face at COFIDES? 

 

Ana Cebrián: “Any investment project abroad is eligible as long as there are investment needs in capex or working capital, but at a local level, that is, there must be a subsidiary or branch. Obviously when we finance capex we will go for longer terms and we can go with more participatory instruments but if a company makes a commercial implementation to open the market it is also eligible and we can finance it via loan. 

 

Any country in the world is eligible, any sector is eligible except real estate promotion or weapons or any topic excluded due to environmental or social risks. Just as we measure financial risks, we also measure non-financial risks, but removing this exclusion list, any sector is eligible. as long as there are those investment needs. 

 

We can go to debt instruments, we can go to equity instruments, subordinated debt... it depends a lot on the size, we go from small, medium-sized companies to IBEX companies... the range is broad but there absolutely has to be an investment project abroad.

 

Structures? We can participate in project finance structures, concession projects, industrial projects, service projects; it can be through organic or inorganic growth; a new implementation, an expansion, a company acquisition… anything that involves an international presence will be eligible and We adapt the instruments to the needs of the company and the type of project. A practical example, a road infrastructure in Colombia. There we can enter into equity by taking a minority percentage accompanying the Spanish sponsor, there may be a local partner, obviously. An industrial implementation in Mexico, automotive sector, which we are directly financing the project. A commercial implementation in Morocco that opens a commercial office, there we will finance only expenses and it will be a shorter period.

 

We make a lot of custom suits: When someone comes with a project we try to satisfy their needs and see what fits best.” 

 

How long can a process last from when financing is requested until it is granted?

 

Ana Cebrián: “There it no longer depends on us, It depends on the companies and the project. An infrastructure project in a concession project involves certain rhythms and progress than an expansion of productive capacity in a market in which the company is already present. If the needs are immediate we are very fast, in a couple of months the operation can be approved, signed and disbursed but it is true that there are projects that take longer to mature. 

 

Then there are issues, such as inorganic growth via purchase, where you do have to be measuring the times to try to adapt because the negotiation processes either paralyze or accelerate and there we do have a lot of capacity to adapt and I will tell you that we are very agile in the processing of operations.” 

 

 

Ana Cebrián: “I believe that companies are aware of the tools that the government provides for internationalization projects. Perhaps they don't know exactly everything we can do, which is why communication efforts like this are so important.”

 

 

And in the case of Cesce, what is the process like?

 

Irene Ciria: "Every depends on the operationSome transactions can be very simple, like selling machinery, where the due diligence is relatively straightforward. But then there are other projects that require a lot of documentation, which isn't always readily available. We conduct a creditworthiness assessment, and depending on the country, we have to consult rating agencies, trade offices, and so on. In other cases, special documentation is needed, such as an export license when dealing with weaponry. It all depends on the transaction. 

 

The amount is also one of the factors that influence us to advance more quickly in the approval of this coverage because there are some operations that must be brought to acceptance by an inter-ministerial risk commission, which is convened every 15 days. So the acceptance of all those operations of greater value, those with certain characteristics, it is true that it takes longer. What actually takes the longest is studying the operation.”  

 

In the current context of crisis, I wanted to ask you if the requirements that you demand from companies are higher, if you are more cautious when approving operations. 

 

Alfonso Noriega: “In the case of ICO, in 2020 it has been demonstrated, of course maintaining the same rigorous admission and analysis criteria, great capacity to react and adapt to the needs of companies. Not only because of the line of guarantees: close to 116.000 million euros, this clearly highlights the great capacity and agility of reaction of the ICO. But in parallel, direct financing activity has been developing, as I mentioned previously. 

 

For example, the launch in the opening month of a new promissory note subscription program in the alternative fixed income market has been something paradigmatic. In just a few months, 125 issues have been financed. The ICO has put more than 600 million euros on the table and has made it possible to channel liquidity to companies for more than 1.800 million euros. 

 

Last year, specific actions were also launched to support the liquidity needs of startups. 

 

All this shows that what has been done is to put a lot of meat on the grill, develop great efforts with the entire ICO team and the Spanish financial sector as a whole, and a great ability to adapt.”

 

Irene, are you maintaining the Covid Line in 2021?

 

Irene Ciria: “As Alfonso also pointed out, we at Cesce had to make a tremendous effort to meet all the needs that were arising. We set up the Covid line of credit in record time—its procedures, its management, its approvals… The first line was very well received; we ended up supporting 800 internationalized companies, of which 464 were SMEs and 288 were not SMEs, and ten of those were publicly traded companies. 

 

That line ended and due to the needs and success of it A second covid line has been exceptionally expanded which is what we are currently managing. We have 215 applications and with insurance currently issued of 364 million euros. There are some criteria for the eligibility of operations, the banks that send us the applications already know them. The collaboration with the financial system has been impressive and we are very happy. For now we continue until June offering quick solutions. On the Covid Line, decisions are very quick; They are absolutely prioritized operations and in a matter of a week, ten days, you can have a confirmation of coverage and an expired policy.” 

 

At COFIDES, do you have any balance of the financing granted in 2020 and the forecast for 2021 and do you consider that it may affect the crisis situation?

 

Ana Cebrián: "We have many projects in the pipeline, under study, so we believe that the activity this year will be very significant. Regarding what we have done last year, I would like to highlight that we have processed the postponement of maturities very quickly, we have done refinancing, we have guaranteed the liquidity that companies needed by accelerating disbursements. 

 

The processing is agile, fast and this year it will depend on what happens in these first months, how the vaccination issue goes, because we have many projects identified but that can be delayed, but even so this first project is going to be very strong because they are already mature. Let's wait for evolution but right now Our forecasts are to have activity and a lot". 

 

To close this set, I would like you to give some advice or recommendation to companies that have projects in mind.

 

Ana Cebrián: “Any company, regardless of size, country, if you are considering a new investment project, of course Go to COFIDES because in some way or another we can give you support. Obviously the decision to advance an investment project abroad does not depend only on financing, but the institutional and financial support that COFIDES can provide is an important element.”

 

Alfonso Noriega: “I encourage you to contact us through the website, we have a section dedicated to customer service to provide guidance on the different financing methods and which one can best adapt to your needs. I believe that 2021 is going to be a key year in the management of the guarantee line itself, in the search for diversification beyond bank financing and there the role of the three institutions that are here is fundamental to help strengthen the balance sheets of Spanish companies and to be able to solidly undertake the projects they may have.

 

ICO too We are implementing partner of the new Multiannual Financial Framework of the European Union between 2021 and 2027; That is to say, the ICO will be able to manage, directly delegated by the Commission, some programs, such as investEU, funds from the Connecting Europe Facility to finance transport, energy, and telecommunications infrastructure. We will also be collaborating to channel Next Generation EU resources. 

 

We constantly have our hand extended to be able to guide and advise them.”

 

Irene Ciria: “In line with COFIDES and ICO we also We are absolutely willing to support those companies with a vocation for the foreign sector. I encourage you to visit our new website, where you can see all the official support products we offer, and if you have any questions about how to contact us… we will continue with the Working Capital Support Line for COVID-19. And this year we launched a strategic plan that ends in 2024, which seeks to streamline and digitize our communications with our clients to facilitate contact and the resolution of any problems they may have.”