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JIS News

Some 70 per cent of Jamaican importers of goods and raw materials from the United States, will benefit from a US$10 million line of credit, which has been secured by the Export-Import (Ex-Im) Bank of Jamaica, as the financial crisis in the US and around the world deepens.
The facility, which is to become effective within the next two weeks, was obtained from the Sovereign Bank of Maryland in the United States, following weeks of due diligence and the determination that the rate of interest was favourable.
This disclosure was made by Managing Director of the Ex-Im Bank, Pamela McLean, in an interview with JIS News, today (October 28).
“The credit facility is the first such arrangement with Sovereign Bank and it is going to help our local importers of goods and raw materials from the United States. They will be able to pay suppliers up front and the transaction will be refinanced for 180 days, so they will get a credit period to pay us back,” she explained.
“The interest is going to be variable, as the formula which they have adopted is going to be libor-based, which is currently about 4.5 per cent, plus 1.25 per cent for their charge, plus the US Ex-Im Bank charge, resulting in an all inclusive rate not exceeding 10 per cent per annum. Given that transactions are going to be for 180 days, the interest rate will be prorated at between 5 and 5.5 per cent for the 180 days,” Mrs. McLean added.
Sovereign Bank, is one of the largest banks in the US North West and has over 750 banking offices in that country. At the end of September last year, they had assets of more than US$87 billion. Sovereign Bank also has an arrangement with the Ex-Im Bank of the US, through which the credit facility will be guaranteed.
The new deal comes at a time when the fallout in the US sub-prime mortgage market has to begun to stifle the international credit market.
Mrs. McLean noted that the intervention of the Ex-Im Bank, by securing the new line of credit, was therefore very timely.
“They (Sovereign Bank) came to us and we discussed it. We were in fact scouting our marketplace to make sure that when we sign this arrangement with them, we would have takers for this line of credit, because the last thing you would want to do is to get into a line of credit and there are no takers. A vast majority of the local importing community source their supplies from the United States, so we followed up with Sovereign Bank. The good thing is that they are not asking for any Government of Jamaica guarantee; they are lending to the Ex-Im Bank on the strength of our own balance sheet,” the Managing Director pointed out.
Mrs. McLean said that while the new facility primarily targets importers, given the mandate of the Ex-Im Bank and the critical role of exporters in growing the economy, the export sector would also benefit.
“My mandate here is to help the export sector. I would expect that the persons who would be using this facility are those who are going to be importing their raw materials and spare parts, although this is not for machinery, which is for more medium to long term financing. This is a straight trade financing line. There is an offer on the table for a medium term financing for capital equipment and we are examining that proposal, but we are not ready yet to take that up. What we are looking at is the trade financing for 180 days,” she pointed out.