NZECO Supports Hakes Marine Win Yacht Build

Page updated 18 Mar 2010

On December the 15th 2009 a Hakes Marine built 52’ racing yacht, the Haspa Hamburg was launched in Wellington Harbour. The yacht is built specifically for a Hamburg based sailing club which has a history stretching over a century focusing on giving young sailors the opportunity to learn and participate in offshore sailing.

The Hamburg club had no prior experience of Hakes Marine and wanted to protect their funds in the event Hakes failed to perform their contractual obligations. They did this by requesting a performance bond equivalent to 100% of the value of the yacht. Hakes approached their bankers who due to lending limits, sought the assistance of New Zealand Export Credit Office (NZECO) to risk share on the issuance of the bond.

Paul Hakes, managing director of Hakes stated “in a recently changing economic world we have been quick to realise and respond to our customer’s new demands. In order to successfully get export contracts for multi-million dollar yachts we have had to offer financial guarantees. Without the NZECO’s support and the validation that comes from the backing of the NZ Government we would have struggled to secure our most recent projects”.

A bond is a financial guarantee, normally issued by banks on behalf of the exporter, which can be called upon by the overseas buyer in the event that the exporter fails to properly perform its contractual obligations.

Miles Fleming from the NZECO notes “we are seeing exporters facing increasing demands for advance payment and performance bonds from their foreign buyers. Often this condition is being required by the Buyer’s financiers to protect them from any performance related issues by New Zealand suppliers”.

“It was great to be able to be able to assess and approve a guarantee to Hake’s bank so they could support them. Hakes kept us informed during the yacht build on a monthly basis as our exposure grew. The whole NZECO team got to see the boat when it was being tested in Wellington harbour which is great to see the efforts rewarded.”

“The General Contract Bond Guarantee has really helped a number of exporters to meet the requirements in export contracts, assists their banks to free up bonding lines, provide access to working capital, and give confidence to international buyers.”

Miles Fleming outlining the process for the NZECO support. “We have a robust assessment process that focuses on the ability of the exporter to manage and fulfill the proposed export contract to the specifications required. We require information from exporters and their bank 4-6 weeks before the bond issue is required. In fact, a number of firms have provided us an insight into their financials, operations and expertise months before they bid for contracts so we can provide an indication of our potential appetite and highlight any issues early on.”

Information required by the NZECO for its assessment includes:

• Examples from an exporter’s sales history of export in terms of scale and/or technical specifications similar to this opportunity. This shows that the exporter has the human and physical resources, and the technical skills, to perform the contract; and
• The exporter’s most recent financial statements and two sets of projected cash-flows; one for the project and one for the whole business during the bond exposure. This can highlight areas of financial weakness and potential contingencies during the exposure period; and
• Detail on sub-contractors and suppliers and their degree of importance in the delivery of the export order; and
• Other domestic and international contracts that the exporter is already committed to and additional contracts that they may receive so the NZECO can see evidence that the exporter has the capacity to finance and physically perform this project, along with any other separate contractual commitments; and
• A draft or final copy of the proposed contract and form of the bond; and
• The exporters relationship with the buyer; and
• The exporters current bonding commitments and performance history (e.g. have you ever had a bond called?)