Export Finance Australia steps up to the plate

In 2021, we assisted customers affected by COVID-19 using our commercial financing and the Australian government’s COVID-19 export capital facility. In total, we provided almost A$250 million (US$178.4 million) in financing, including A$152 million for COVID-19-affected businesses that could demonstrate strong financials and a pathway back to profitability. The COVID-19 export capital facility enabled us to provide an additional A$72 million to businesses that could not meet our normal criteria but had strong track record.

This financial lifeline provided working capital buffers or supported a change in business strategy. Many businesses need to adapt or pivot their strategies to grow. We also continued to give financial relief to some existing customers during the year, including payment extensions and repayment holidays.

Under our mandate, we can also finance tourism businesses that derive a significant amount of revenue from international visitors. The impact of COVID-19 on Australian tourism has been significant and, for many tourism businesses that rely on international visitors, the loss of this revenue means they do not meet our normal debt serviceability criteria. Despite these challenges, around two-thirds of the total finance provided by the COVID-19 facility was for tourism businesses.

Demand for our support for was strong during the year among small and medium-sized businesses, with SMEs representing more than nine out of 10 of our customers.

Australian exporters are on the front line of trade disruptions resulting from increasing strategic competition. This has limited access to China. Nevertheless, Australia’s export performance has been resilient: total goods and services exports rose to a record A$511 billion over the year to November 2021.

Exporters pursued three strategies to adapt to the demand shock: reallocation, deflection and transformation. Reallocation was relatively seamless for bulk commodities with deep global markets. Deflection involved using alternative routes to market. Transformation involved changing production processes to sell unaffected products.

We maintained a constant presence in the US dollar ECP market and, to a lesser extent, in euros. During 2021 we issued more than US$3 billion equivalent in short-term offshore debt.

Our ECP programme limit size was recently increased to US$4 billion from US$2 billion. Our usual strategy is to fund new loans – along with temporary mismatches in cash flows – via the short-term market until we build up a critical mass, which we then term out in bond markets. Our ECP issuance is likely to grow as we become increasingly involved in supporting larger and more complex transactions.

Export Finance Australia paper is keenly supported by investors even in challenging market conditions. We choose to adopt a disciplined issuance approach but aim to satisfy investor appetite where we can. We continue to tender all our ECP requirements through our panel to ensure we receive the tightest pricing.

We aim to run a match-hedged book between the tenor of our assets and liabilities. Toward the end of calendar year 2021, our funding ratio was circa 90 per cent – partly assisted by our A$250 million 10-year fixed-rate issue last August.

However, since then we have been tasked with some large funding projects for the shareholder. These have decreased this ratio and will most likely require us to enter the 144A/Reg S market for an inaugural term debt offering in excess of US$1 billion in Q1 or Q2 2022.  

This new issue will provide significant diversification in our investor base as we have only issued Australian dollar denominated term debt over the past few years. It will also provide offshore investors the opportunity to gain exposure to US dollar denominated term bonds explicitly guaranteed by the Commonwealth of Australia, which should result in a favourable outcome.