US Exim moves to support Boeing with supply chain finance guarantee
The Export-Import Bank of the United States (US Exim) has granted two authorisations in support of the aviation industry and its supply chain, including issuing a guarantee for a loan from Citi to Boeing.
Under US Exim’s supply chain finance programme, the government agency granted a 90% guarantee for a US$500mn facility, allowing Citi to finance payments due from Boeing to its US-based suppliers for 12 months. The move will support an estimated 1,900 jobs across the country, according to US Exim.
“Financing is needed due to the heightened risk associated with the aircraft manufacturing industry resulting from Covid-19 and global economic conditions as well as the lack of available commercial financing particularly for such short-term transactions,” reads a statement from US Exim.
Travel was upended as lockdowns were imposed around the world at the start of the year in a bid to control the spread of the pandemic. At its worst in April, global commercial flights were down more than 70% compared to the same month in 2019, according to aviation tracking site FlightRadar. The plummet in demand has left airlines and subsequently plane makers cash strapped and in need of financial support.
At the end of October, Boeing announced it will cut thousands more jobs because of mounting losses. The company said that it will have a workforce of 130,000 by the end of 2021, 20% down on the 160,000 people in its employment before the pandemic.
The second US Exim transaction was a guaranteed loan of US$37mn to facilitate the purchase of a Gulfstream G650ER aircraft by Turkey’s Cengiz Insaat. In this case, the reason for agency support is a lack of available commercial financing in Turkey, particularly for aviation assets, says the bank.
Another two potential authorisations to support the export of US-made planes to Copa Airlines of Panama are being considered.
The first would provide a loan guarantee, with Citi as a guaranteed lender, to Copa Airlines of US$327mn for the purchase of several Boeing 737 MAX 9 Aircraft.
The other commitment is for a US$336mn guaranteed loan to the airline for the purchase of more of the same aircraft.
“Given Covid-19, important economic and national security issues, and increasing global competition for jobs, Exim is dedicated to helping American exporters succeed and sell more of their amazing ‘Made in the USA’ goods around the world,” says Kimberly Reed, president and chair of US Exim.
Made in the US
As the chaos surrounding the November 3 US election slowly dissipates, important topics for President-elect Joe Biden will be his ‘Buy American’ plan and how he will treat China.
The Biden campaign has said that it will create a US$400bn federal procurement fund for products made in the US, claiming that it would generate millions of new jobs in manufacturing and innovation.
Under the Donald Trump administration, US Exim has played a key role in taking on the US’ ultimate trade rival China. As part of its seven-year reauthorisation in December 2019, the agency was instructed by congress to set up the ‘Program on China and Transformational Exports’, with the aim of neutralising export subsidies provided by China.
The bank was directed to allocate at least 20% of its financing authority for competing with China in key high-technology sectors, such as 5G and quantum computing.
At the same time, US Exim was also given the mandate to support the extension of loans, guarantees and insurance at rates and terms fully competitive with those of China and other competing countries.
S: Global Trade Review