A GIEK guarantee has a high security rating (AAA). You can be completely confident that GIEK will meet its obligations and pay out under the guarantee if anything goes wrong.
Buyer credit guarantee
GIEK will therefore ask to be sent a compliance letter from the bank/co-guarantor or debtor. In the case of large commitments, annual reviews are performed and the borrower is normally asked to submit its annual report and key financial figures. The main objective of the annual review is to obtain insight into the company’s/group’s operations, strategy and financial status and to allow us to become familiar with the challenges the company/group will face in the time ahead.
For customers, such close follow-up means we may discover at an early stage the needs they will have in future and the role, if any, we can play.
Payment default – GIEK pays compensation
Buyer credit guarantee
The borrower is required to service the guaranteed loan, but if payment is not forthcoming and the guarantee’s conditions have been fulfilled GIEK will pay out under the guarantee to the guarantee recipient. Payments may fail to materialise because the borrower becomes insolvent or does not want to pay for some reason, or due to newly arisen political circumstances. GIEK may choose to cover each repayment instalment as it falls due or to pay the total amount outstanding on the loan. GIEK will also consider whether it is expedient to take the lender’s place in the loan agreement or whether the lender should continue to front the loan. GIEK has the right to instruct the recipient of the guarantee, and this party is obligated to keep GIEK informed of all factors relating to the loan agreement.
GIEK as creditor
GIEK’s guarantees trigger exports. As a result the state and the banks have a long-term financial risk linked to the customers’ business operations. About 90% of GIEK’s guarantee liabilities are to the oil and offshore supply industry, which is experiencing overcapacity, low earnings and high levels of debt.
Several of GIEK’s customers have applied to GIEK and the banks for further deferment of principal repayments and easing of borrowing terms. GIEK’s follow-up of ongoing guarantees has therefore demanded a large use of resources.
GIEK’s goal in these activities is always to reduce the Norwegian state’s risk of loss and help see to it that the shipping companies’ contracts and jobs are maintained where possible. At the same time, strengthening earnings and competitiveness is crucial to the industry’s long-term survival. GIEK focuses on finding long-term solutions to the shipping companies’ debt burden to which all parties in the capital structures must contribute.
In these processes, GIEK has the same rights and obligations as the banks and therefore participates as their equal. One consequence of this is that GIEK has had to assume temporary ownership in pledged property and companies in order to safeguard the state’s assets.
If the lender’s commitments are defaulted on, GIEK can step into those commitments and make payments under the guarantee in accordance with the original repayment plan.