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EUJapanCentreforIndustrialCooperation

SeminarReport

Multinationalbusinessfinanceintimesof

globalfinancialcrisis:

Lookingatalternativestrategies

10June 2010


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Thisreportispublishedby:TheEUJapanCentreforIndustrialCooperation

133Round

Cross

Ichibancho,

Chiyoda

ku,

Tokyo,Japan1020082

Tel: +81(0)332216161

Fax: +81(0)332216226

URL: www.eujapan.eu

June2010


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1SeminarReport 2010: Multinationalbusinessfinanceintimesofglobalfinancialcrisis

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On 10 June 2010, the EU-Japan Centre for Industrial Cooperation, in cooperation with

the Maison Franco-Japonaise organised a seminar on "Multinational Business Financein times of Global Financial Crisis: Looking at Alternative Strategies", with speakersfrom the University of South Brittany and two private firms, Morrison & Foerster andWhite & Case.

The objective was to present various schemes developed recently to financeinternational operations of EU and Japanese companies. In the current context offinancial and economic crisis, it is indeed increasingly difficult to obtain loans frombanks and finance companies. As a consequence, some companies have experimentednew legal arrangements to finance their operations:

F.B.O. (Finance, Build, Operate); Corporate Funding Association (C.A.F); Innovative solutions such as: Modern Rights Issue, Private convertible bonds,

Tokyo AIM; the Pan Asian Bond Market, Kangaroo bonds; and Export loans, import loans,

investment loans from the Japanese Bank for International Cooperation (JBIC) andall trade insurance activities from Nippon Export and Investment Insurance (NEXI).


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2 SeminarReport 2010:Multinationalbusinessfinanceintimesofglobalfinancialcrisis

SSeemmiinnaarrOOuuttlliinnee Date: Thursday, 10 June 2010, 14:00 ~ 16:00

Place: EU-Japan Centre for Industrial Cooperation

Organised by: EU-Japan Centre for Industrial Cooperation

Maison franco-japonais

Programme:

14:00 Opening remark, Mr. Julien Guerrier, General Manager,

EU-Japan Centre for Industrial Cooperation

14:05 Building multinational companies networks to escape from banking constraints in

times of liquidity crisis

Speaker: Mr. Gilles LHUILIER, Professor (Private Law), South Brittany University,

14:40 New and Existing Capital Markets Products Available to Japanese Companies

Speaker: Mr. Tony GRUNDY, Partner, Morrison & Foerster

15:10 The Role of ECAs (Export Credit Agencies) in times of Global Financial Crisis

Focusing on JBIC and NEXI

Speaker: Mr. Toshio DOKEI, Partner, White & Case

15:40 Questions & Answers

16:00 Closing remark, Mr. Julien Guerrier, EU-Japan Centre for Industrial Cooperation

Photos:

Top(fromleft):audience,audience,Prof.Lhuilier

Bottom(fromleft):Mr.Grundy,Mr.Dokei,Q&Asession


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This new type of contract underlines the following points:

Generated profits will repay the loans granted by the Chinese consortium and will finance

infrastructures in Congo;

B2B networks between Chinese industrial and financial groups are an important strength;

The Chinese commitment is to arrange financing and the price of networking is very

expensive (6 billion USD).

2- The Corporate Funding Association (C.A.F):

A new business to business cooperative bank system has been created recently due to the

adoption of new tax regulations on transfer price. This system reproduces an old Swiss banking

system, created by the WIR Bank of Basel in 1944, a not-for-profit bank that started with 16

members and has grown to 62 000 members today.

The CAF groups several companies, each one being both a shareholder and a borrower. The

cooperative bank statute allows them to redistribute the profits to the borrowers (who are also

shareholders) and to escape the transfer price regulation.

The WIR system mainly involves SMEs but the French system includes some of the biggest

groups/companies.

Tony Grundy: New and Existing Capital Markets Products Available to Japanese Companies

In Japan, the existing universe of capital markets products tapped by Japanese companies

seeking equity and debt finance is mainly made up of straight bonds, convertible bonds and

common shares. The principal offshore market for Japanese companies is the Euromarket.

Some Japanese companies have overseas share listings, for example in New York and London.

Only a few innovative financial products have been offered in Japan over the last 40 years,

mainly because the Japanese Civil Law system limits the types of capital markets products and

features of those products that a Japanese company can issue. The lack of any overarching legal

or regulatory authority in Japan also makes change difficult.

The recent innovative solutions appeared in Japan are:

-Modern Rights Issue (May 2010) (Takara Leuben Co. Ltd). Market practitioners expect more

rights issues particularly for smaller entities with a mainly domestic shareholder base;

-Private convertible bonds;

-Tokyo AIM: it is a new market launched one year ago, but it is still difficult to attract

companies, probably because of the global financial crisis. Although initially intended to

develop as a highly successful market for growth companies, Tokyo AIM will list other

businesses such as the non-core business which is wholly or partly spun off from an existing

group;

-The Pan Asian Bond Market: it is a project (at the concept stage) promoted by the Capital

Markets Association for Asia to develop an Asian version of the Euromarket. It is expected to

enable bonds denominated in Asian countries currencies to be issued regionally. This couldbenefit Japanese companies that have significant operations in Asian countries;

-Kangaroo bonds: it is a new market developing in Australia: the issue by non Australian

companies of bonds in the Australian wholesale market, like Samurai bonds in Japan.


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Toshio Dokei: The role of Export Credit Agencies (ECAs) in times of Global Financial Crisis

Focusing on JBIC and NEXI

The role of Export Credit Agencies is to cover companies against various risks abroad such as

commercial and political risks, wars, expropriation, limitation on foreign exchange, etc, that

private institutions can hardly cover, and to provide them with a favourable interest rate. ECAs

have been playing a major role and today, during the financial crisis, they are supporting theinternational development of domestic industries and provide a safety net to maintain

international financial order.

The Japanese Bank for International Cooperation (JBIC) maintains and improves the

international competitiveness of Japanese industry by utilizing a variety of financing

instruments such as export loans, import loans, investment loans, etc. It is an international

branch of Japan Finance Cooperation.

Nippon Export and Investment Insurance (NEXI) focuses on trade insurance: it has facilitated

Japanese companies' export expansion and overseas development for 50 years. NEXI covers

losses incurred from the political and commercial risks. Recently, NEXI expanded the scope ofinsurance coverage for business transactions of overseas branches to support international

business activities done by Japanese companies and expanded bilateral reinsurance

relationships with other ECAs in order to provide insurance for supporting global supply chain

of Japanese companies abroad.

The role of ECAs is a major one in this period of financial crisis: they are supplementing the

private sector and acting as an activator of the private financial institutions. Both public and

private financial institutions should work together in order to support the international financial

sector.

The audience gathered 30 participants from EU and Japanese private companies or foreign

Embassies. Questions were mostly asked about this new type of DRC-Chinese contract and the

share of risks in this innovative formula.


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PPaarrttiicciippaannttss&&EEvvaalluuaattiioonnTotalnumberofparticipants=30

Average evaluation of the event by participants on the scale of 1 to 5

(1 = Poor/Low; 5 = Excellent/High)

4.09

4.06

3.81

3.92

3.9

3.84

4.05

3.91

3.96

3.92

0 1 2 3 4 5

Staff

Event structure

Interpretation

Handout

Mr. Dokei presentation

Mr. Grundy presentation

Prof. Lhuilier presentation

Adherence to interests

Adherence to objective

Learning value

Business

46%

Media

13%

JP

Government

10%

JP Public

Organisation

7%

Industrial

Federations

7%

Academic

4%

European Commission and

EU Member States Embassies 13%

1


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PPrreesseennttaattiioonnss&&HHaannddoouuttss Seminar programme

Presentation- Building multinational companies networks to escape from banking

constraints in times of liquidity crisis (by Prof. Gilles Lhuilier)

Presentation- New and existing capital markets products available to Japanese

companies (by Mr. Tony Grundy)


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Multinational Business Finance times of Global Financial Crisis:Looking at Alternative Strategies

Date & Time: Thursday, 10 June 2010, 14:00 - 16:00Venue: EU-Japan Centre for Industrial Cooperation

Co-organised by: Maison Franco-Japonaise and EU-Japan Centre for Industrial Cooperation

Language: English/Japanese (simultaneous interpretation) Participation:

The global market and the changing trends of contemporary international finance significantly affect multinationalbusiness finance. Business financing is one of the most necessary tools for multinational companies to obtain capital forthe further expansion of their business. Large banks and finance companies generally provide business financeto multinational companies: apart from funds originating from shareholders and lenders, multinational companies mayborrow funds from large banks. However, obtaining capital became even harder since the 2008 global financialcrisis evolved into a funding crisis.

Facing difficulties obtaining capital, some companies have tried out new legal arrangements to finance their exportoperations without asking for help from large banks. Set up by international legal experts, these new arrangementsmake use of classic instruments (such as joint venture companies, compensation, holdings acquisition, guaranty funds,etc.) to create networks between large companies allowing them to evade constraints imposed by the banks.

In this seminar Professor Gilles LHUILIER will illustrate the topic with two specific examples:(1) a contract concluded between China and the Democratic Republic of Congo, and the financial aspects of what hasbeen called the contract of the century (with an infrastructure financing for 9 billion USD).(2) a special system of cooperative bank companies that 15 French companies have set up in order to create notonly some intra-group funding, but also a clearing house as well as a corporate cooperative bank.

These two examples seem to belong to different worlds, but it is possible to find many similarities between them.In fact, networks or cooperation between companies (between companies and banks, between companies belonging to

the same group, or between competitors) help to cope with the deficiencies of bank-related financing systems.For example, the creation of new and flexible legal arrangements helps to secure the due diligence process andenables loans to be obtained more easily. Such new legal instruments consist in particular ofsui generis contractsdrawn up by international lawyers, who themselves contribute progressively to the development of new ways ofdoing business.

To extend the discussion on the topic of global business and finance in times of financial crisis, the seminar is alsojoined by two legal practitioners to discuss the issues of capital market products and export credits.

Programm

14:00 Opening remark, Mr. Julien Guerrier, General Manager, EU-Japan Centre for Industrial Cooperation

14:05 Building multinational companiesnetworks to escape from banking constraints in times ofliquidity crisis

Speaker: Mr. Gilles LHUILIER, Professor (Private Law), South Brittany University, France

14:40 New and Existing Capital Markets Products Available to Japanese Companies

Speaker: Mr. Tony GRUNDY, Partner, Morrison & Foerster

15:10 The Role of ECAs (Export Credit Agencies) in times of Global Financial Crisis Focusing on

JBIC and NEXI

Speaker: Mr. Toshio DOKEI, Partner, White & Case

15:40 Questions & Answers

16:00 Closing remark, Mr. Julien Guerrier, General Manager, EU-Japan Centre for Industrial Cooperation

This seminar is a side event for an international symposium organised at Maison Franco-Japonaise on 11-12 June 2010 on foreigndirect investments in Asia - Japanese, Chinese and Indian Investments in and out: New Trends in the Globalization of Law from andwithin Asia.


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