(FROM THE WALL STREET JOURNAL 10/6/15)
By Kimberly S. Johnson
Ethiopian Airlines had to scramble at the last minute this
summer when it needed to pay for a plane it ordered from Boeing Co.
years ago.
The East African carrier got the aircraft last month but,
instead of owning it, the airline is leasing the plane from a bank,
said Chief Executive Tewolde Gebremariam. It couldn't secure a loan
for the purchase because it lacked a financing guarantee from the
U.S. Export-Import Bank.
Amid a clash over spending priorities, congressional Republicans
effectively shut down the U.S. Ex-Im Bank by failing to reauthorize
the agency at the end of June. That means the bank can't make new
loans or provide loan guarantees to foreign companies so they can
buy American products and services. And American companies can't
renew their export-credit insurance policies.
The shutdown was a blow to many companies in the U.S. and abroad
that are fighting for revenue in a sluggish global economy. Many
foreign companies like Ethiopian Airlines are looking to do
business with trusted American suppliers, while U.S. companies are
searching abroad for new customers.
A strong dollar and weaker growth hamper those efforts. U.S.
exports of goods and services were down 3.5% from a year earlier in
the first seven months of 2015. Exports fell 3.2% in August,
according to the Commerce Department.
Declining exports, combined with a lack of U.S. Ex-Im Bank
funding, is "a double-whammy," said David Ickert, finance chief of
Air Tractor Inc., which makes small aircraft for the agriculture
industry. Softer prices for crops such as soybeans have growers in
places like Brazil and Argentina ordering less equipment, he
said.
Air Tractor, based in Olney, Texas, typically uses export-credit
insurance from the U.S. Ex-Im Bank. Foreign customers typically
account for over half of the company's sales, but Mr. Ickert
expects that figure to drop to 30% this year. "There are definitely
some multiple headwinds we're facing right now," he said.
Many foreign companies say they can't secure financing from
commercial banks without some kind of government-backed financing
or guarantee, which most developed countries offer through their
own Ex-Im banks.
Ethiopian Airlines's Mr. Gebremariam said he hopes to buy more
than two dozen planes from Boeing in coming years, but will
consider going to European rival Airbus Group SE if the U.S. Ex-Im
Bank stays out of business.
"There's definitely an impact on our expansion and growth," he
said. "Some economies in Africa are considered high risk, so banks
wouldn't be able to finance us directly without Ex-Im backing."
In a letter sent to Boeing officials last week, Comair Ltd., an
aviation company based in South Africa, said a continued lack of
U.S. Ex-Im Bank support would force the airline to borrow in
foreign currency. But doing so, given the volatility of its local
currency, the rand, would "expose Comair to too great an
exchange-rate risk on its balance sheet," said CEO Erik Venter.
Boeing said such sentiments reflect conversations it has been
having with customers. "They want to keep buying American, but the
uncertainty over the future of the Export-Import Bank is forcing
them to consider other options," said a company spokesman. Boeing,
a strong proponent and major beneficiary of the bank, expects it to
reopen. But an extended shutdown would prompt Boeing to consider
moving work offshore to make its customers eligible for Ex-Im
backing, Chairman Jim McNerney said last month.
General Electric Co. is already doing so, to make it easier for
its customers to use Ex-Im funding from other countries, such as
Canada, France and Hungary. In Hungary, where GE has manufacturing
facilities, the export-import bank is providing a loan to Bresson
AS Nigeria Ltd., a power-generation company, to buy GE turbines for
new plants in Nigeria, said Barakat Balmelli, a financial adviser
to Bresson on the deal.
Hungarian officials are looking to increase their level of
export-import-related lending to 1 billion euros, or about $1.1
billion, by the end of the year. Last month the government expanded
agreements between its Ex-Im Bank and local Hungarian commercial
banks.
Ms. Balmelli said Bresson chose to work with Hungary's Ex-Im
Bank partly because of the U.S. shutdown. "You have other countries
changing their policies to accommodate these new business
opportunities while the U.S. is just fiddling about," she said.
Last week, the U.S. Ex-Im Bank's Republican supporters moved to
bring the bill reauthorizing the bank to a vote. The procedure
would force a vote on the bill, which is backed by nearly all
Democrats and many Republicans, later this month.
Meanwhile, small U.S. companies, which can't relocate or move
jobs overseas, are feeling the brunt of the bank's closure. W.S.
Darley & Co., a maker of firetrucks and related gear, said the
shutdown already has cost it a contract worth about $7 million.
The customer's loan didn't get final Ex-Im Bank approval, and
since W.S. Darley's contract was contingent on that financing,
"that sale could just be gone," said Chief Operating Officer Peter
Darley.
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(END) Dow Jones Newswires
October 05, 2015 18:58 ET (22:58 GMT)
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