On Thursday, the country’s official trade credit agency, the Export-Import Bank of the United States (EXIM), approved a series of finance authorizations in support of American workers and industry exporters that will bolster 4,800 U.S. jobs in the struggling aviation sector.
In the first transaction, EXIM Board unanimously approved a 90 percent guarantee of a $500 million facility under the agency’s Supply Chain Finance Guarantee Program. The EXIM guarantee to Citibank would allow it to finance accounts receivable due from The Boeing Company to its U.S.-based suppliers for 12 months.
The authorization would support an EXIM-estimated 1,900 aviation-related jobs across the country, including California, Florida, Kansas, New York, Texas, and Washington. Boeing’s approximately 1,000 eligible suppliers, about half of which are small businesses, also stand to benefit as the aircraft supply chain has been negatively impacted by the unprecedented COVID-19 pandemic.
Tool for recovery
EXIM financing is needed due to the heightened risk for 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.
President and Chairman Kimberly A. Reed, Chief Banking Officer Steve Renna, and Chief of Staff Ryan McCormack completed a two-day visit to Washington state this week to promote EXIM’s U.S. supply chain financing guarantee program as a tool for the nation’s economic recovery from COVID-19.
The EXIM team visited Pacific Tool Inc., a small manufacturer and Boeing supplier in Redmond. Founded in 1966, Pacific Tool manufactures over 25,000 specialized aerospace tools, including all Boeing standard tools, and provides industry-leading engineering and technical assistance.
The company currently has 75 employees—down from 150—and has worked with every Boeing airplane program, starting with the 727 and subsequently the 737, 747, 757, 767, 777, and 787.
“EXIM Bank is critical to our sales of Boeing specialized production tools to foreign companies. Not only the financing of new Boeing planes, but also the other critical financing programs that make us competitive in foreign markets,” said Pacific Tool co-owner Lee Falck.
The EXIM team then traveled to Everett to meet with Boeing’s President and CEO for Commercial Airplanes Stanley A. Deal and Boeing Capital Corporation’s (BCC) President Timothy R. Myers. BCC’s primary mission is to support the other Boeing business units by ensuring that airlines and operating lessors have the financing they need to buy and take delivery of Boeing aircraft.
“EXIM recognizes the importance of our nation’s supply chains—which are comprised of thousands of U.S. small businesses and the great American workers they employ. As we heard and saw at both Pacific Tool Inc. and The Boeing Company, small businesses like Pacific Tool, which is a part of Boeing’s supply chain, play a big role in our nation’s economic well-being,” said Chairman Reed. “Particularly in light of the unprecedented impact COVID-19 has had on the availability of capital and global market conditions, EXIM stands ready to provide the support and financing needed to our nation’s exporters of all sizes and their supply chains.”
Chief Banking Officer Renna added, “The ever-tightening credit markets are straining the ability of companies like Boeing to pay their suppliers. EXIM is stepping in to ensure that major manufacturers have access to the credit they need to keep the supply chain viable and intact.”
The EXIM team then toured Boeing’s Everett facility, which is the largest manufacturing building in the world. Thousands of aerospace employees in Everett support aircraft fabrication and production, product development, aviation safety and security and airplane certifications.
In July 2020, EXIM’s Board of Directors unanimously approved a transaction, also under EXIM’s Supply Chain Finance Guarantee Program, to guarantee 90 percent of a $510 million purchase facility for a term of one year for Credit Agricole Corporate and Investment Bank to purchase accounts receivable from CFM International, Inc. (CFMI)/General Electric Corporation (GE) that are due from The Boeing Company.
The purchase facility would support an estimated $3 billion in export sales of aircraft engines and an estimated 1,700 total direct and indirect jobs throughout the U.S. supply chain, including jobs at CFMI/GE across Indiana, North Carolina, and Ohio. The transaction will facilitate increased liquidity for CFMI/GE and its suppliers during a time of heightened risk associated with the aircraft manufacturing industry resulting from the COVID-19 pandemic.
Foreign aircraft sales
On Thursday, the EXIM Board voted unanimously to notify Congress of pending transactions to support the export of American-made aircraft to Copa Airlines of Panama.
If approved, EXIM’s final commitment would guarantee a loan, with Citibank participating as a guaranteed lender, to Copa Airlines of approximately $327 million for the purchase of several Boeing 737 MAX 9 Aircraft exported from The Boeing Company’s aircraft facility in Renton, WA, which are powered by CFM engines manufactured in Cincinnati, OH.
These transactions would support approximately 2,700 American jobs, as determined by EXIM’s job calculator, and many small businesses in the aircraft supply chain stand to benefit as well.
Additionally, the EXIM Board unanimously voted to approve a guaranteed loan of approximately $37 million to facilitate the purchase of a Gulfstream G650ER aircraft by Cengiz Insaat of Turkey. EXIM estimates the transaction would support 200 American jobs, primarily in Savannah, GA, where much of Gulfstream’s workforce is based.
And in the private market
Earlier this week, global aviation private equity firm Castlelake, L.P., which specializes in investment strategies around aircraft ownership and servicing, announced the launch of a new Aviation Lending Program. Castlelake’s program will provide financing solutions to buyers of commercial aircraft, enabling them to navigate periods of disruption in the aviation sector while continuing to execute on their business plans.
“The aviation lending program is a natural extension of Castlelake‘s longstanding investment strategy in aviation while supporting our valued aviation-related partners across the industry,” said Rory O’Neill, chief executive officer and managing partner of Castlelake, upon announcing the program this week.
Via the Aviation Lending Program, Castlelake will provide a variety of financing solutions to aircraft buyers through options including mezzanine financing, senior secured financing and high loan-to-value financing.
Castlelake’s aviation lending program builds on the firm’s 15 years of experience investing in the aviation sector throughout multiple business cycles, including “periods of distress and capital dislocation.”