BA Boeing Co

By Doug Cameron 

Boeing Co. is scrambling to renegotiate an about $85 million satellite contract that became the first big casualty of the U.S. Export-Import Bank's loss of its operating charter due to congressional opposition.

Asia Broadcast Satellite last month terminated its order for a Boeing 702SP satellite, although the two say they are continuing to discuss the deal. The Bermuda-based telecommunications company said the federally-backed bank's inability to finance new loans led it begin evaluating options outside the U.S. that could attract support from other export credit agencies.

The Ex-Im Bank and similar state-backed banks overseas provide loans and guarantees to back sales have been one of the space industry's most reliable funding sources. Ex-Im has provided almost $1 billion a year in loans to finance satellites and space launches since prioritizing the space sector in 2010.

It has backed satellites made by Boeing, Lockheed Martin Corp., Orbital ATK Inc., and the Space Systems Loral unit of Canada's MacDonald Dettwiler & Associates Ltd. It also has financed launches by entrepreneur Elon Musk's Space Exploration Technologies Corp., or SpaceX.

The satellite industry is far more reliant on export credit support than sectors such as commercial jets as most banks are reluctant to finance assets that are difficult to repossess or place with other customers. Ex-Im said it has backed around 60% of sales by U.S. manufacturers in recent years, compared with around 15% of commercial jet deals.

"Ideally on ABS and for our other campaigns, Ex-Im will be reauthorized by the end of the year or we will continue to see terminations and losses," said a spokesman for Boeing, the largest beneficiary of the agency's support and the most vocal proponent of reopening the bank.

Other satellite makers have expressed concern that sales campaigns are being affected by the uncertainty over Ex-Im's future as Congress continues to wrangle over reauthorizing the mandate that expired on June 30.

"American exporters are being put in the uncomfortable position of having to scramble to find private financing to replace Ex-Im programs," said Dan Stohr, a spokesman for the Aerospace Industries Association, a trade group. He said some of its members' satellite sales were being threatened or even lost because of the lapse in Ex-Im's mandate.

Industry executives and bankers said the bank's removal from the market, however temporary, had made it tougher to close deals.

"Ex-Im financing is a critical component of a number of satellites. That has been an issue with orders," said MDA Chief Executive Daniel Friedmann on an investor call last month. The company has used Ex-Im and Canada's Export Development Corp. to support sales. "Without Ex-Im, there won't be enough money in the market to finance all the satellites, " he said.

Mr. Friedman expressed particular concern about backing for space launches, with capacity squeezed after a series of high-profile failures including rockets made by SpaceX and Orbital ATK.

SpaceX played down the threat, and said only two of the 50 launches in its current manifest were due to be backed by the bank. Orbital ATK has recently relied on the bank for about one satellite deal a year, though doesn't currently have any Ex-Im backed space business.

Global commercial satellite sales reached $15.9 billion last year and launch services added another $5.9 billion, according to the Satellite Industry Association, a trade group. It has become increasingly competitive as more countries pursue their own space industry aspirations.

Ex-Im backed satellites and space launches worth $941 million in fiscal 2014, most of it via direct loans rather than the guarantees used to support commercial jet sales. This compares with around $50 million a year before 2010 as the agency responded to criticism that U.S. companies were being outgunned by overseas rivals that secured backing from export agencies such as Coface in France.

Mr. Stohr said overseas agencies have started to market their backing of space deals more aggressively in Ex-Im's absence, and bankers said France, the U.K., Canada, Japan and even Russia have intensified their efforts to support satellite sales and space launches with export credit support.

"Without [Ex-Im], opportunities could go to Coface," said Dara Panahy, a partner at Milbank, Tweed, Hadley & McCloy who has worked for space clients, including ABS.

Ex-Im's opponents said its clients have become too accustomed to relying on the bank's support to remain competitive, and have overplayed the impact of its shuttering. "The sky hasn't fallen in," said Dan Holler, communications director at Heritage Action for America, which promotes conservative policies in Congress.

Write to Doug Cameron at doug.cameron@wsj.com

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(END) Dow Jones Newswires

August 22, 2015 08:14 ET (12:14 GMT)

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