This case involves a railroad company that hired a financial advisor to support a project to develop a high-speed bullet train. To develop the railroad, the company partnered with foreign technology companies and banks for financial support, along with domestic government agencies. The financial advisor was hired to advise on a number of issues, including export finance. The railroad company terminated its agreement with the advisor due to the advisor’s alleged inability to advise on a number of critical issues, including export finance. An expert in financial advising with experience in export finance to discuss standards in providing support on such projects and opine on whether they were met.
Question(s) For Expert Witness
- 1. Please describe your experience as a financial advisor, specifically as it pertains to cross-border projects.
- 2. How might the scope of a financial advisor's duty differ on a project that involves export financing as well as support from domestic government agencies?
Expert Witness Response E-271639
I have spent 40+ years in the financial sector, including approximately 16 years as an international vice president for an export credit agency. I have advised and participated in many cross-border sales of goods and services and managed significant and complex financing arrangements, including funding from export credit agencies, government entities, and commercial lenders. I have experience in both commercial financing arrangements as well as project related financings. As a former international vice president with export development, I have considerable multi-sector experience in the world of advising both exporters and buyers, along with local and global financial institutions, with respect to facilitating the financing required to close an export-based sale of goods/services. The scope of a financial advisor with respect to potential export credit agency-supported financing would differ from domestic government agencies and/or corporate lenders in terms of sizing the issue of export mandate and matching applicable programs available to fund the export purchase. This would need to be mapped to the applicable export credit agency product offering in terms of a potential for direct financing support or via guarantee arrangement with a partner bank of the applicable export credit agency. The advisor would also need to assess whether or not the export credit agency lending arrangement and/or lending partnership was required to participate on wholly commercial terms and pari passu with other lending entities, or whether it could be a subordinate lender to the project’s financing structure by way of tenor, etc. They would also need to understand what type of financing would likely be provided vis a vis OECD guidelines and the participating export credit agency’s mandated guidelines. I have knowledge of JBIC’s offerings and approach to export support, as well as general knowledge of various government financing’s programs and the approach of many other export credit agencies.
Expert Witness Response E-235625
The entirety of my professional experience has involved cross-border projects. I worked first as an international banker and then as an export financing officer for manufacturers. The same is true of my work in academia, which has also addressed both the ethical and legal responsibilities of financial advisors. The specific terms of the agreement may set specific parameters but generally, based on the summary, the financial advisor would be responsible to be knowledgeable about the export and other agencies involved in the structure. I have been involved with several transportation systems (including rail and aircraft) and communication system financing transactions in the structuring and implementation. My role was to serve as the advisor for the manufacturer seeking to structure financing to realize the sale. I have also been called on when a bank client or my employer has been involved in disputes concerning standby letters of credit drawdowns, export insurance claims, etc.
Due to the nature of cross-border financings, the financial expert has to engage and work with specialized attorneys as dictated by the case specifics both in the exporting and importing countries. The advisor would provide input to ensure the structure is developed such that conditions of the agencies are met. Specialized legal counsel is sought related to cross-border legal and/or tax issues result associated with the development of the financial structure. They also advise the rail company on how to develop the structure such as to maximize the value to the railroad company (i.e., so that the financing adds to the return or, alternatively minimally detracts from the profitability of the sale). The advisor would also advise on first identifying risks, as well as on options related to negotiating away or mitigating risks (e.g., export insurance), or pricing risks that must be retained to proceed with the structure.