Pre-export finance—structure, parties and risks
Produced in partnership with Dentons

The following Banking & Finance practice note produced in partnership with Dentons provides comprehensive and up to date legal information covering:

  • Pre-export finance—structure, parties and risks
  • What is pre-export finance (PXF)?
  • Typical PXF transaction structure
  • Variations to the basic PXF structure—use of trading companies
  • The key parties to a PXF transaction
  • The producer and the buyer
  • The lender
  • Trading companies
  • Letter of credit bank
  • Key risks for the lender
  • More...

Pre-export finance—structure, parties and risks

What is pre-export finance (PXF)?

PXF is an established structure used to provide finance to producers of goods and commodities. It is a type of trade finance. PXF structures were borne out of the fact that traditionally, many producers of goods and commodities, particularly in emerging markets, were not considered to be sufficiently bankable for the purposes of obtaining finance by more orthodox means, such as conventional corporate loans against the balance sheet of the borrower.

In a classic PXF facility, funds will be advanced by a lender or syndicate of lenders (in this Practice Note, 'lender' refers either to a single lender or a syndicate of lenders) to producers to assist them in meeting either their working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or their capital investment needs (for example, investment in plant and machinery and other elements of infrastructure).

A typical PXF facility will have a tenor of between one and five years, although it is also common for facilities to be amended and restated during the course of their lives.

PXF facilities are usually secured by:

  1. an assignment of rights by the producer under an ‘offtake contract’ (ie a sale and purchase contract between the producer and a buyer of that producer of the goods or commodities produced

Popular documents