Fight Over Ex-Im Bank Threatens Future Satellite Financing

An ongoing standoff in Congress over reauthorizing the U.S. Export-Import Bank puts at risk an entity that has been increasingly important for satellite projects, say industry executives. The bank, which provides loan and loan guarantees for U.S.-made exports, is facing the expiration of its congressional authorization and possibly reaching the loan exposure limits of its charter, said Phil Cogan, vice president-communications. The bank has never lost its authorization and it remains unclear exactly what would happen if it did, he said.

The bank, an independent agency that provided $1.3 billion in satellite financing in 2011, is operating on an extension of its authorization. The 5-year reauthorization, passed by Congress in 2006, ended Dec. 31 and the most recent extension of the authorization is up May 31, Cogan said. Overall, the bank provided some $33 billion in financing in 2011, he said. It has helped fund other telecom projects, including cell and radio services, though satellite has been the largest recipient within the telecom industry, he said.

The bank has been especially important in recent years for big-ticket exports, such as planes, said a satellite industry lawyer. The inherent complexities of gaining financing approval through the bank often makes the process only worthwhile for larger projects, he said. Ex-Im agreed last year to provide $700 million in financing for Inmarsat’s purchase of its Ka-band constellation, Global Xpress, from Boeing.

There has been some movement in Congress toward a reauthorization. But a recent procedural vote to add an amendment or reauthorization to a Senate bill, introduced by Sen. Maria Cantwell, D-Wash, didn’t pass. The bill would have extended the authorization until 2015 and increase the agency’s lending limit. Cantwell’s office didn’t comment. Ex-Im has faced some new opposition from Republicans, such as Sen. Jim DeMint of South Carolina, who described the bank as providing “corporate welfare,” in an op-ed in The Washington Examiner.

A looming loan exposure limit is also on the horizon, said Cogan. Ex-Im is at about $90 billion of its $100 billion lending limit, and based on “what’s in the pipeline” it could reach that limit on or before May 31, he said. The bank, which provides some insurance on receivables, would still be able to pay out claims if it reaches the limit, but may not be able to continue making loans, he said. The uncertainty is already causing issues for businesses that make plans far in advance, Cogan said. Small businesses received about $6 billion of its lending in 2011. Other industries that use Ex-Im financing heavily include aerospace, energy and gas, transportation infrastructure, medical technology, agricultural equipment and engineering services, said Cogan.

Critics complain of the government’s involvement in business, but Cogan says the bank’s role is increasingly important considering the number of other export credit agencies, now numbering around 200. The bank itself is self-sustaining and has made a healthy profit, paying the U.S. government back $1.9 billion after expenses over the last five years, he said. Many commercial lenders have “no appetite for risk” in certain areas and the bank may provide the only option, he said. “The quality of the goods and services are second to none and the success should be based on quality they provide, not financing.” The inability to find favorable financing may tip the scales in the favor of other countries that rely more on the export credit agencies, Cogan said. The dispute probably won’t affect the financing of deals already completed, said a satellite industry lawyer.