Commission Delegated Regulation (EU) 2023/262 of 7 September 2022 amending Annex II to Regulation (EU) No 1233/2011 of the European Parliament and of the Council on the application of certain guidelines in the field of officially supported export credits

Benchmark market curves reflect the credit risk of a whole sector or class of buyers. This market information may be relevant when name specific information is not available. In general, the quality of the information inherent to these markets depends upon their liquidity. In any case, one should look for market instruments that provide the closest match in terms of the ECA contract characteristics, such as date, credit rating, term of maturity, and currency denomination.

ANNEX X

CRITERIA AND CONDITIONS GOVERNING THE APPLICATION OF A THIRD PARTY REPAYMENT GUARANTEE AND THE CRITERIA FOR ASSESSING MULTILATERAL OR REGIONAL INSTITUTIONS

PURPOSE

This Annex provides the criteria and conditions that govern the application of third party repayment guarantees according to Article 23 e) of the Arrangement. It also provides the criteria by which multilateral or regional institutions should be assessed when determining if an institution should be subject to the premium rules for Market Benchmark Transactions in Article 23 c) of the Arrangement.

APPLICATION

When security in the form of a repayment guarantee from an entity is provided for the total amount at risk (i.e. principal and interest), the applicable Country Risk Classification and Buyer Risk Category may be that of the guarantor when the following criteria are met:

— The guarantee covers the entire duration of the credit.

— The guarantee is irrevocable, unconditional and available on-demand.

— The guarantee is legally valid and capable of being enforced in the guarantor country’s jurisdiction.

— The guarantor is creditworthy in relation to the size of the guaranteed debt.

— The guarantor is subject to the monetary control and transfer regulations of the country in which it is located, except when the guarantor is a multilateral institution that the Participants have agreed is generally exempt from such controls and limitations.

If the guarantor is a subsidiary/parent of the guaranteed entity, Participants shall, on a case-by-case basis, determine whether: (1) in consideration of the relationship between the subsidiary/parent and the degree of legal commitment of the parent, the subsidiary/parent is legally and financially independent and could fulfil its payment obligations; (2) the subsidiary/parent could be affected by local events/regulations or sovereign intervention; and (3) the Head Office would in the event of a default regard itself as being liable.

When security in the form of a repayment guarantee from an entity is provided for a limited amount at risk (i.e. principal and interest), the applicable Country Risk Classification and Buyer Risk Category may be that of the guarantor for the portion of the credit subject to the guarantee, providing that all other relevant criteria listed under Case 1 are met.

For the unguaranteed portion, the applicable Country Risk Classification and Buyer Risk Category is that of the obligor.

The Participants may agree that a multilateral or regional institution is subject to the premium rules for Market Benchmark Transaction in Article 23 c) if the institution is generally exempt from the monetary control and transfer regulations of the country in which it is located. Such institutions shall be assessed on a case-by-case basis on their own merits and in consideration of whether:

— the institution has statutory and financial independence;

— all of the institution’s assets are immune from nationalisation or confiscation;

— the institution has full freedom of transfer and conversion of funds;

— the institution is not subject to government intervention in the country where it is located;

— the institution has tax immunity; and

— there is an obligation of all its Member countries to supply additional capital to meet the institution’s obligations.

The assessment should also take into consideration the historical payment record in situations of country credit risks default either in the country where it is located or in an obligor’s country, and any other factors that may be deemed appropriate in the assessment process.

The list of such multilateral and regional institutions is not closed and a Participant may nominate an institution for review according to the above-listed considerations. The list of multilateral and regional institutions that are subject to the premium rules for Market Benchmark Transaction in Article 23 c) shall be made public by the Participants.

ANNEX XI

BUYER RISK CATEGORIES QUALITATIVE DESCRIPTIONS

Better than Sovereign (SOV+)

This is an exceptional classification. The entity achieving such a classification is one with an exceptionally strong credit profile that could be expected to fulfil its payment obligations during a period of sovereign debt distress or even default. International Credit Rating Agencies issue regular reports listing Corporate and Counterparty Ratings that exceed the Sovereign’s Foreign Currency Rating. Except when the risk sovereign has been identified through the Sovereign Risk Assessment Methodology as being significantly higher than country risk, Participants proposing that an entity be classified as better than sovereign shall reference such better than sovereign ratings in support of their recommendation. In order to be classified as better than its host sovereign, an entity would be expected to display several or normally a majority of the following characteristics or equivalents:

— a strong credit profile;

— substantial foreign exchange earnings relative to its currency debt burden;

— production facilities and cash generation ability from subsidiaries or operations offshore, especially those domiciled in highly rated sovereigns, i.e. multinational enterprises;

— a foreign owner or a strategic partner which could be relied on as a source of financial support in the absence of a formal guarantee;

— a history of preferential treatment of the entity by the sovereign, including exemption from transfer and convertibility constraints and surrender requirements for export proceeds, and favourable tax treatment;

— committed credit lines from highly rated international banks, especially credit lines without a material adverse change (MAC) clause which enable banks to withdraw committed facilities in the event of a sovereign crisis or other risk events; and

— assets held offshore, especially liquid assets, often as a result of rules allowing exporters to trap and maintain cash balances offshore that are available for debt service.

Normally the SOV+ buyer risk category is not applicable to:

— publicly-owned entities and utilities, sub-sovereigns as line ministries, regional governments, etc.;

— financial institutions domiciled in the sovereign’s jurisdiction; and

— entities primarily selling to the domestic market in local currency.

Sovereign (SOV)

Sovereign obligors/guarantors are entities that are explicitly legally mandated to enter into a debt payment obligation on the behalf of the Sovereign State, typically Ministry of Finance or central bank (³⁶). A risk designated as sovereign is one where:

— the obligor/guarantor is legally mandated to enter into a debt payment obligation on behalf of the Sovereign and thereby commits the full faith and credit of the sovereign; and

— in the event of rescheduling of sovereign risk, the debt in question would be included in the rescheduling and payment obligations acquired by the sovereign by virtue of the rescheduling.

Equivalent to the Sovereign (CC0): Exceptionally Good Credit Quality

The “equivalent to sovereign” category embraces two basic types of obligors/guarantors:

— Public entities where due diligence reveals that either the buyer has the implicit full faith and credit/support of the sovereign or that the likelihood of sovereign liquidity and solvency support is very high, both in relation to recovery prospects as well as default risk. Non-sovereign public entities equivalent to the sovereign would also include companies owned by the government with a monopoly or near monopoly on operations in a sector (e.g. power, oil, gas).

— Corporate entities with an exceptionally strong credit profile, displaying features in terms of both default and recovery prospects, which indicate that the risk could be seen as being equivalent to sovereign. Candidates could include strong blue chip corporates or very important banks for which the likelihood of sovereign liquidity and solvency support is high.

Exceptionally good credit quality implies that the risk of payment interruption is expected to be negligible and that the entity has an exceptionally strong capacity for repayment and this capacity is not likely to be affected by foreseeable events. The credit quality is typically manifested in a combination of some, if not all, of the following characteristics of the entity’s business and financial profile:

— exceptionally good to very good cash and income generation

— exceptionally good to very good liquidity levels

— exceptionally low to very low leverage

— excellent to very strong business profile with proven and very strong management abilities

The entity is also characterised by a high quality of financial and ownership disclosure, unless there is a very high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal to or better than what corresponds to this buyer risk category.

Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely that an obligor/guarantor classified in buyer risk category CC0 would be rated between AAA (Country Category 1) and B (Country Category 7) by accredited CRAs.

Very Good Credit Quality (CC1)

The risk of payment interruption is expected to be low or very low. The obligor/guarantor has a very strong capacity for repayment and this capacity is not likely to be affected by foreseeable events. The obligor/guarantor has a limited or very limited susceptibility to adverse effects of changes in circumstances and economic conditions. The credit quality is typically manifested in a combination of some, if not all, of the following characteristics of the business and financial profile:

— very good to good cash and income generation

— very good to good liquidity levels

— very low to low leverage

— very strong business profile with proven management abilities

The entity is also characterised by a high quality of financial and ownership disclosure, unless there is a very high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal to or better than what corresponds to this buyer risk category.

Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely that an obligor/guarantor classified in buyer risk category CC1 would be rated between AAA (Country Category 1) and B (Country Category 7) by accredited CRAs.

Good to Moderately Good Credit Quality, Above Average (CC2)

The risk of payment interruption is expected to be low. The obligor/guarantor has a good to moderately good capacity for repayment and this capacity is not likely to be affected by foreseeable events. The obligor/guarantor has a limited susceptibility to adverse effects of changes in circumstances and economic conditions. The credit quality is typically manifested in a combination of some, if not all, of the following characteristics of the business and financial profile:

— good to moderately good cash and income generation

— good to moderately good liquidity levels

— low to moderately low leverage

— moderately strong business profile with proven management abilities

The entity is also characterised by a high quality of financial and ownership disclosure, unless there is a very high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal to or better than what corresponds to this buyer risk category.

Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely that an obligor/guarantor classified in buyer risk category CC2 would be rated between A+ (Country Category 1) and B- or worse (Country Category 7) by accredited CRAs.

Moderate Credit Quality, Average (CC3)

The risk of payment interruption is expected to be moderate or moderately low. The obligor/guarantor has a moderate or moderately good capacity for repayment. There is a possibility of credit risk developing as the obligor/guarantor faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to inadequate capacity to meet timely payments. However, business or financial alternatives may be available to allow financial commitments to be met. The credit quality is typically manifested in a combination of some, if not all, of the following characteristics of the business and financial profile.

— moderately good to moderate cash and income generation

— moderately good to moderate liquidity levels

— moderately low to moderate leverage

— moderate business profile with proven management abilities

The entity is also characterised by an adequate quality of financial and ownership disclosure, unless there is a very high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal to or better than what corresponds to this buyer risk category.

Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely that an obligor/guarantor classified in buyer risk category CC3 would be rated between BBB+ (Country Category 1) and B- or worse (Country Category 6) by accredited CRAs.

Moderately Weak Credit Quality, Below Average (CC4)

The risk of payment interruption is expected to be moderately weak. The obligor/guarantor has a moderate to moderately weak capacity for repayment. There is a possibility of credit risk developing as the obligor/guarantor faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to inadequate capacity to meet timely payments. However, business or financial alternatives may be available to allow financial commitments to be met. The credit quality is typically manifested in a combination of some, if not all, of the following characteristics of the business and financial profile:

— moderate to moderately weak cash and income generation

— moderate to moderately weak liquidity levels

— moderate to moderately high leverage

— moderately weak business profile with limited track record of management abilities

The entity is also characterised by an adequate quality of financial and ownership disclosure, unless there is a very high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal to or better than what corresponds to this buyer risk category.

Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely that an obligor/guarantor classified in buyer risk category CC4 would be rated between BB+ (Country Category 1) and B- or worse (Country Category 5) by accredited CRAs.

Weak Credit Quality (CC5)

The risk of payment interruption is expected to be high to very high. The obligor/guarantor has a moderately weak to weak capacity for repayment. The obligor/guarantor currently has the capacity to meet repayments but a limited margin of safety remains. However, there is a likelihood of developing payment problems as the capacity for continued payment is contingent upon a sustained, favourable business and economic environment. Adverse business, financial, or economic conditions will likely impair capacity or willingness to repay. The credit quality is typically manifested in a combination of some, if not all, of the following characteristics of the business and financial profile:

— moderately weak to weak to very weak cash and income generation

— moderately weak to weak liquidity levels

— moderately high to high leverage

— weak business profile with limited or no track record of management abilities

The entity is also characterised by a poor quality of financial and ownership disclosure, unless there is a very high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal to or better than what corresponds to this buyer risk category.

Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely that an obligor/guarantor classified in buyer risk category CC5 would be rated between BB- (Country Category 1) and B- or worse (Country Category 4) by accredited CRAs.

ANNEX XII

CRITERIA AND CONDITIONS GOVERNING THE APPLICATION OF COUNTRY RISK MITIGATION TECHNIQUES AND BUYER RISK CREDIT ENHANCEMENTS

PURPOSE

This Annex provides detail on the use of country risk mitigation techniques listed in Article 28 a) of the Arrangement and the buyer risk credit enhancements listed in Article 29 a) of the Arrangement; this includes the criteria, conditions and specific circumstances which apply to their use as well as the impact on the MPRs.

COUNTRY RISK MITIGATION TECHNIQUES

A written document, such as a deed or a release or trustee arrangement, sealed and delivered to a third party, i.e. a person not party to the instrument, to be held by such third party until the fulfilment of certain conditions and then to be delivered by him to the other party to take effect. If the following criteria are satisfied subject to consideration of the additional factors listed, this technique can reduce or eliminate the transfer risks, mainly in the higher risk country categories.

— The escrow account is related to a foreign exchange-earning project and the flows into the escrow account are generated by the project itself and/or by other offshore export receivables.

— The escrow account is held offshore, i.e. located outside of the country of the project where there are very limited, transfer or other country risks (i.e. in a High Income OECD country or High Income Euro Area country).

— The escrow account is located in a first class bank, which is not directly or indirectly controlled by interests of the obligor or by the country of the obligor.

— The funding of the account is secured through long-term or other appropriate contracts.

— The combination of the sources of revenues (i.e. generated by the project itself and/or the other sources) of the obligor flowing through the account are in hard currency and can reasonably be expected to be collectively sufficient for the service of the debt for the entire duration of the credit, and come from one or more creditworthy foreign customers located in better risk countries than the country in which the project is located (i.e. normally High Income OECD countries or High Income Euro Area countries).

— The obligor irrevocably instructs the foreign customers to pay directly into the account (i.e. the payments are not forwarded through an account controlled by the obligor or through its country).

— The funds which have to be kept within the account are equal to at least six months of debt service. Where flexible repayment terms are being applied under a project finance structure, an amount equivalent to the actual six months debt service under such flexible terms are to be kept within the account; this amount may vary over time depending on the debt service profile.

— The obligor has restricted access to the account (i.e. only after payment of the debt service under the credit).

— The revenues deposited in the account are assigned to the lender as direct beneficiary, for the entire life of the credit.

— The opening of the account has received all the necessary legal authorisations from the local and any other appropriate authorities.

— The escrow account and contractual arrangements may not be conditional and/or revocable and/or limited in duration.

The technique applies subject to a case-by-case consideration of the above characteristics and, inter alia, with regard to:

— the country, the obligor (i.e. either public or private), the sector, the vulnerability in relation to the commodities or services involved, including their availability for the entire duration of the credit, the customers;

— the legal structures, e.g. whether the mechanism is sufficiently immune against the influence of the obligor or its country;

— the degree to which the technique remains subject to government interference, renewal or withdrawal;

— whether the account would be sufficiently protected against project related risks;

— the amount which will flow into the account and the mechanism for the continuation of appropriate provision;

— the situation with regard to the Paris Club (e.g. possible exemption);

— the possible impact of country risks other than the transfer risk;

— the protection against the risks of the country where the account is located;

— the contracts with the customers, including their nature and duration; and

— the global amount of the expected foreign earnings in relation to the total amount of the credit.

The application of this country risk mitigation technique may result in a one category improvement in the applicable country risk classification for the transaction, except for transactions in Country Risk Category 1.

Contract and financing negotiated in convertible and available local, other than hard, currencies and financed locally that eliminates or mitigates the transfer risk. The primary debt obligation in local currency would, in principle, not be affected by the occurrence of the first two country credit risks.

— The ECA liability and claims payment or the payment to the Direct Lender are expressed/made throughout in local currency.

— The ECA is normally not exposed to the transfer risk.

— In the normal course of events, there will be no requirement for local currency deposits to be converted into hard currency.

— The borrower’s repayment in his own currency and in his own country is a valid discharge of the loan obligation.

— If a borrower’s income is in local currency the borrower is protected against adverse exchange rate movements.

— Transfer regulations in the borrower’s country should not affect the borrower’s repayment obligations, which would remain in local currency.

The technique applies on a selective basis in respect of convertible and transferable currencies, where the underlying economy is sound. The Participant ECA should be in a position to meet its obligations to pay claims expressed in its own currency in the event that the local currency becomes either “non-transferable” or “non-convertible” after the ECA takes on liability. (A Direct Lender would however carry this exposure.)

The application of this risk mitigation technique may result in a discount of no more than 20 % to the country credit risk portion of the MPR (i.e. a local currency factor [LCF] with a value of no more than 0,2).

BUYER RISK CREDIT ENHANCEMENTS

The following table provides definitions of the buyer risk credit enhancements that may be applied, along with their maximum impact on the applicable MPRs. For transactions subject to country risk category 1–7 MPRs, the maximum CEF used in the MPR formula is stipulated; for market benchmark transactions, the maximum discount to the applicable Market Benchmark MPR is stipulated (³⁷).

| Credit Enhancement | Definition | Maximum CEF (Country Risk Category 1–7) | Maximum Discount (Market Benchmark) |

| --- | --- | --- | --- | | Assignment of Contract Proceeds or Receivables | In the event a borrower has contracts with strong off-takers, whether offshore or local, a legally enforceable assignment of the contract provides rights to enforce the borrower’s contracts and/or make decisions under major contracts in the place of the borrower after a default under the loan. A direct agreement with a third party in a transaction (a local government agency in a mining or energy transaction) allows Lenders to approach a government to seek remedies for expropriation or other violation of contractual obligations related to the transaction. An existing company operating in a difficult market or sector may have receivables related to the sale of production with a company or companies located in a more stable environment. Receivables would generally be in a hard currency but may not be the subject of a specific contractual relationship. Assignment of these receivables could provide asset security in the accounts of the Borrower, giving the Lender a preferential treatment in the cash flow generated by the Borrower. | 0,10 | N/A | | Asset Based Security | Control of an asset shown by: (1) mortgage on very mobile and valuable piece of property; and (2) property that has entire value in itself. An asset based security is one that can be reacquired with relative ease such as a locomotive, medical equipment or construction equipment. In valuing such a security, the ECA should take into consideration the legal ease of recovery. In other words, there is more value when the security interest in the asset is perfected under an established legal regime and less value where the legal ability to recover the asset is questionable. The precise value of an asset-based security is set by the market, with the relevant “market” being deeper than a local market because the asset can be moved to another jurisdiction. NOTE: The application of an asset based security credit enhancement for transactions subject to country risk category 1–7 MPRs applies to the buyer risk, where the asset based security is held internally within the country in which the transaction is domiciled. | 0,25 | 15 % | | Fixed Asset Security | A fixed asset security is most typically component equipment which may be constrained by its physicality such as turbine or manufacturing machinery integrated into an assembly line. The intent and value of the fixed asset security is to provide the ECA with more leverage over the use of the asset in recouping losses in the event of default. The value of a fixed asset security varies dependent on economic, legal, market and other factors. | 0,15 | 10 % | | Escrow Account | Escrow accounts involve debt service reserve accounts held as security for the lenders or other forms of cash receivable accounts held as security for the lenders by a party not controlled or sharing common ownership with the buyer/obligor. The escrowed amount must be deposited or escrowed in advance. The value of such security is nearly always 100 % of the nominal amount in such cash accounts. Permits greater control over use of cash, ensures that debt is serviced before discretionary spending. NOTE: The application of an escrow account credit enhancement for transactions subject to country risk category 1–7 MPRs applies to the buyer risk, where the escrow account is held internally within the country in which the transaction is domiciled. Cash security significantly diminishes the risk of default for the covered instalments. | escrowed amount as % of credit up to a maximum of 0,10 | escrowed amount as % of credit up to a maximum of 10 % |

ANNEX XIII

CHECKLIST OF DEVELOPMENTAL QUALITY

CHECKLIST OF DEVELOPMENTAL QUALITY OF AID FINANCED PROJECTS

A number of criteria have been developed in recent years by the DAC to ensure that projects in developing countries that are financed totally or in part by Official Development Assistance (ODA) contribute to development. They are essentially contained in the:

— DAC Principles for Project Appraisal, 1988;

— DAC Guiding Principles for Associated Financing and Tied and Partially Untied Official Development Assistance, 1987; and

— Good Procurement Practices for Official Development Assistance, 1986. Of these, the DAC Principles for Project Appraisal and the Good Procurement Practices for Official Development Assistance were, together with several other “principles” or “good practices” the DAC produced, published together in the Development Assistance Manual, DAC Principles for Effective Aid (DAM) in 1992.

CONSISTENCY OF THE PROJECT WITH THE RECIPIENT COUNTRY’S OVERALL INVESTMENT PRIORITIES (PROJECT SELECTION)

Is the project part of investment and public expenditure programmes already approved by the central financial and planning authorities of the recipient country?

(Specify policy document mentioning the project, e.g. public investment programme of the recipient country.)

Is the project being co-financed with an international development finance institution?

Does evidence exist that the project has been considered and rejected by an international development finance institution or another DAC Member on grounds of low developmental priority?

In the case of a private sector project, has it been approved by the government of the recipient country?

Is the project covered by an intergovernmental agreement providing for a broader range of aid activities by the donor in the recipient country?

PROJECT PREPARATION AND APPRAISAL

Has the project been prepared, designed and appraised against a set of standards and criteria broadly consistent with the DAC Principles for Project Appraisal from paragraphs 91–162 of the DAM? Relevant principles concern project appraisal under:

In the case of a revenue producing project, particularly if it is producing for a competitive market, has the concessionary element of the aid financing been passed on to the end-user of the funds? (paragraph 115 DAM).

c) Environmental assessment (paragraphs 145 to 147 DAM).

PROCUREMENT PROCEDURES

What procurement mode will be used among the following? (For definitions, see Principles listed in Good Procurement Practices for ODA from paragraphs 409–429 of the DAM).

Is it envisaged to check price and quality of supplies (paragraph 153 DAM)?

ANNEX XIV

LIST OF DEFINITIONS

For the purpose of the Arrangement:

Related Entity references are benchmark instruments of a related borrower rather than the exact identical borrower in the supported transaction. In the case where the obligor has no quoted bonds or CDSs, and there exists within the obligor’s organisational structure a parent, subsidiary or sister company with Name Specific Bonds or CDSs outstanding in the market, then with regard to Article 23 c), those Name Specific Bonds or CDSs may be used as if they had been issued by the obligor itself if:

This definition applies whether the “tying” is by formal agreement or by any form of informal understanding between the recipient and the donor country, or whether a package includes components from the forms set out in Article 32 of the Arrangement that are not freely and fully available to finance procurement from the recipient country, substantially all other developing countries and from the Participants, or if it involves practices that the DAC or the Participants consider equivalent to such tying.

t) Weighted Average Life of the Repayment Period : the time that it takes to retire one-half of the principal of a credit. This is calculated as the sum of time (in years) between the starting point of credit and each principal repayment weighted by the portion of principal repaid at each repayment date.

ANNEX XV

COMMERCIAL INTEREST REFERENCE RATE (CIRR) PROVISIONS

CHAPTER I

General provisions

(a) Each Participant wishing to establish a CIRR shall initially select one of the following two base rate systems for its national currency: (1) three-year government bond yields for a repayment term of up to and including five years; five-year government bond yields for over five and up to and including eight and a half years; and seven-year government bond yields for over eight and a half years; or (2) five-year government bond yields for all maturities. Exceptions to the base rate system shall be agreed by the Participants.

(b) CIRRs shall be set at a fixed margin of 100 basis points above each Participant’s base rate unless Participants have agreed otherwise.

(c) Other Participants shall use the CIRR set for a particular currency should they decide to finance in that currency.

(d) A Participant may change its base-rate system after giving six months’ advance notice and with the counsel of the Participants.

(e) A Participant or a non-Participant may request that a CIRR be established for the currency of a non-Participant. In consultation with the interested non-Participant, a Participant or the Secretariat on behalf of that non-Participant may make a proposal for the construction of the CIRR in that currency using Common Line procedures in accordance with Articles 56 to 61.

The interest rate applying to a transaction shall not be fixed for a period longer than 120 days. A margin of 20 basis points shall be added to the relevant CIRR if the terms and conditions of the official financing support are fixed before the contract date.

b) In the event of a voluntary, early repayment of a loan of or any portion thereof, the borrower shall compensate the government institution providing official financing support for all costs and losses incurred as a result of such early repayment, including the cost to the government institution of replacing the part of the fixed rate cash inflow interrupted by the early repayment.

CHAPTER II

Specific provisions

Repayment Term (years) New nuclear power stations and Annex IV projects with long construction periods (¹) All other contracts (²) Base Rate (Government bonds) Margin(bps) Base Rate (Government bonds) Margin(bps) < 11 Relevant CIRR in accordance with Chapter I, Article 1 of this Annex XV 11 to 12 7 years 100 7 years 100 13 8 years 120 7 years 120 14 9 years 120 8 years 120 15 9 years 120 8 years 120 16 10 years 125 9 years 120 17 10 years 130 9 years 120 18 10 years 130 10 years 120 (¹) For new nuclear power plants, Article 1 a) 1) of Annex II refers. For Annex IV, this includes new large hydro-power projects, Appendix II Project Class A, and Appendix III Adaptation Projects. (²) For new nuclear power plants, Articles 1 a) 2) to 4) of Annex II refers. For Annex IV, this includes all projects not covered in footnote 1 above.

A Participant providing official financing support for fixed rate loans in accordance with the provisions of the Sector Understandings for Rail Infrastructure (Annex V) or the Terms and Conditions Applicable to Project Finance Transactions (Annex VI): shall apply, as minimum interest rates:

b) For repayment terms in excess of 12 years, the relevant CIRRs constructed in accordance with Article 1 of this Annex XV, to which a surcharge of 20 basis points shall be added for all currencies.

CHAPTER III

Operational provisions for the communication of minimum interest rates (CIRRs)

Any changes in the CIRRs shall enter into effect on the fifteenth day after the end of each month.

When market developments require the notification of an amendment to a CIRR during the course of a month, the amended rate shall be implemented 10 days after notification of this amendment has been received by the Secretariat.

’

(¹) As defined in Article 5 of the OECD Convention.

(²) Defined by the World Bank on an annual basis according to per capita GNI.

(³) The status of a country in terms of: (1) whether it is a High Income country (as defined by the World Bank on an annual basis according to per capita GNI); (2) membership in the OECD; and (3) whether it is part of the Euro Area is reviewed on an annual basis. The designation of a country under Article 23 c) as a High Income OECD country or a High Income Euro Area country as well as the removal of such designation will only come into effect after the country’s income classification (High Income or otherwise) has remained unchanged for two consecutive years. A change in a country’s designation as a High Income OECD country or a High Income Euro Area country as well as the removal of such designation related to a change in OECD membership or being part of the Euro Area will come into effect immediately at the time of the annual review of countries’ status.

(⁴) The assessment of whether or not a Multilateral or Regional Institution is generally exempt from the monetary control and transfer regulations of the country in which it is located shall be made based on the criteria set out in Annex X. The Participants shall maintain a list of the institutions deemed as meeting the critteria and, therefore, subject to the premium rates for Market Benchmark Transactions.

(⁵) To qualify as an asset-backed transaction, there must be a first priority security interest on the asset being financed; and, in the case of a lease structure, assignment and/or a first priority security interest in connection with the lease payments.

(⁶) To qualify as a project finance transaction, the transaction must meet the Basic Criteria set forth in Appendix 1 to Annex VI of the Arrangement.

(⁷) Notwithstanding this threshold, for transactions in Market Benchmark countries using terms and conditions provided under Annex V (rail) or Annex VI (project finance), the relevant minimum commercial loan participation rules applicable under those Annexes shall apply.

(⁸) This portion of the 25 % criterion may be met where the non-cash payment portion of a transaction involving a single bank receiving ECA cover includes an uncovered portion of at least 25 %. Such transactions must meet all of the other criteria of subparagraph 1, including the pari passu provisions of this tiret.

(⁹) Where the obligor/guarantor is rated by more than one Accredited CRA, the CRA rating is the best available foreign currency rating on a senior unsecured basis for the obligor (or guarantor). The Secretariat shall compile and maintain a list of such accredited CRAs.

(¹⁰) In the event that a relevant Name-Specific market pricing entity is not rated by an Accredited CRA, then the resulting market pricing shall be considered to be below the corresponding TCMB rate and be subject to prior notification in accordance with Article 46.

(¹¹) The premium rates charged for transactions with a third party guarantee provided by an obligor in a Category 0 country, High Income OECD country, High Income Euro Area country, or by a multilateral or regional institution deemed as meeting the criteria set out in Annex X are subject to the requirements set out in Article 23 c).

(¹²) In the case of a third party guarantee, the applicable country risk classification and buyer risk category must be related to the same entity, i.e. either the obligor or the guarantor.

(¹³) For administrative purposes, some countries that are eligible to be classified into one of the eight Country Risk Categories may not be classified if they do not generally receive officially supported export credits. For such non-classified countries, Participants are free to apply the country risk classification which they deem appropriate.

(¹⁴) Rules related to the classification of buyers should be understood to stipulate the most favourable classification that can be applied, e.g. a sovereign buyer may be classified in a less favourable buyer risk classification.

(¹⁵) The MPRs associated with the Better than Sovereign (SOV+) buyer risk category are 10 % lower than the MPRs associated with the Sovereign (CC0) buyer risk category.

(¹⁶) Where the non-sovereign borrower is rated by more than one accredited CRA, notification is only required where the buyer risk rating is more favourable than the most favourable of the CRA ratings.

(¹⁷) The review is ongoing.

(¹⁸) Based on the annual review by the World Bank of its country classification, a per capita Gross National Income (GNI) threshold will be used for the purpose of tied aid eligibility; such threshold is available on the OECD website (https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/financing-terms-and-conditions/).

(¹⁹) However, in cases where the buyer of the switchyard is the same as the buyer of the power plant and the contract is concluded in relation to the original switchyard for that power plant, the terms and conditions for the original switchyard shall not be more generous than those for the nuclear power plant.

(²⁰) Ex ante semi-annual repayment reporting requirement does not apply to small aircraft transactions with a total financed amount of less than USD 5 million (i.e. de minimis transactions).

(²¹) An explanation shall be provided where the proposed risk-rating of a buyer/borrower exceeds the risk rating of the host sovereign.

(²²) For transactions with an export contract value of less than USD 5 million, a Participant not wishing to follow the risk classification procedure set out in Articles 6 to 8 of this Appendix shall apply the risk classification “8” for the buyer/borrower which is the subject of the transaction and shall notify the transaction in accordance with Article 24 a) of this Sector Understanding.

(²³) For transactions with an export contract value of less than USD 5 million, a five working-day period shall apply.

(²⁴) Together with information regarding any involvement (provided with due respect for confidentiality duties).

(²⁵) Together with information regarding any involvement (provided with due respect for confidentiality duties).

(²⁶) For the purposes of this questionnaire the “State” is the country that is being proposed for addition to the Cape Town Convention List under Appendix II, Section 2 II of the ASU. Where appropriate, these questions shall also be answered in respect of the laws of the particular “territorial unit” of the State in which the relevant operator of an aircraft [or other relevant body as set out in Article 35 (b) Appendix II] is located and “national law” shall be read as including a reference to the relevant local law.

(²⁷) For the purposes of this questionnaire, “national law” refers to all national legislation of a State, including but not limited to, the Constitution and its Amendments, any federal, state and district law or regulation.

(²⁸) For example, that (i) treaties prevail over other law as a matter of constitutional or similar framework law in State X; or (ii) legislation is required in State X, and has been enacted expressly setting out the priority of the Cape Town Treaty and/or superseding such other law; or (iii) the Cape Town Treaty or its implementing legislation is (a) more specific than other law (lex specialis derogat legi generali); and/or (b) later in time than such other law (lex posterior derogat legi priori), and as a result of (a) and/or (b) prevails over such other law.

(²⁹) For example, is there any reason why the rights and remedies granted to creditors under the Convention, including those granted under the QDs, would not (a) be recognised as being effective; or (b) be sufficient by themselves, to enable such rights and remedies to be validly exercised in the State?

(³⁰) An example of an administrative action for the purposes of this question might be the failure by the State to put in place any procedures or resources to give effect to a provision of the Convention or a Qualifying Declaration. Another example would be the failure by a State to put in place proper procedures in its aircraft registry for recording IDERAs.

(³¹) Please include in your analysis any precedent/decision relating to the recognition of rights of creditors, including ECAs, when relevant.

(³²) Such language shall remain until a comprehensive list of specific benchmarks is agreed by Participants and at the latest until 31 December 2022.

(³³) It is understood that the 2012 Recommendation applies equally to projects that are not eligible for these financial terms and conditions.

(³⁴) The maximum repayment term for jack-up rigs used in the installation of wind turbines shall be 12 years.

(³⁵) Cable car transportation systems associated with recreational activities such as skiing are not eligible for support under this Annex.

(³⁶) Most typically this would be a risk on the central bank or Ministry of Finance. For central government entities other than the finance ministry, due diligence shall be undertaken to affirm that the entity commits the full faith and credit of the sovereign.

(³⁷) For a Market Benchmark Transaction, the premium rate resulting from the application of buyer risk credit enhancements may not be lower than the applicable Minimum Actuarial Premium.