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Ex-Im Satellite Financing Push Seen Easing Effects of Defense Downturn

Export-Import Bank Chairman and President Fred P. Hochberg. Credit: Ex-Im Bank photo

WASHINGTON — The U.S. Export-Import Bank has financed 60 percent of all U.S. commercial satellite exports over the past two years and will maintain that effort as U.S. manufacturers turn to the commercial markets in a declining defense spending environment, Ex-Im Bank President Fred P. Hochberg told satellite industry officials March 18.

In a speech demonstrating just how aggressive Ex-Im has become as it vies with its French counterpart, Coface, to promote its domestic industry, Hochberg said financing will no longer be an issue for U.S. satellite exporters.

“We don’t want you to lose a sale due to a lack of financing,” Hochberg said. “You may lose it on price, or schedule, or for some other reason — but not on financing.

“Particularly in light of federal budget cuts, we stand ready to support your expansion into commercial sales to counter declines in government and military sales.”

Ex-Im’s awakening to the satellite sector as a source of economic growth and job creation in the United States has been dramatic.

The bank financed about $50 million per year in satellite project loans in the eight years through 2009. In 2010, it watched helplessly as U.S. mobile satellite services provider Iridium Communications secured a $1.8 billion loan guarantee from Coface, meaning Thales Alenia Space of France and Italy is building Iridium’s 81 satellites.

Thales Alenia Space is leveraging the Iridium work to qualify a new satellite platform that the company says will have multiple applications in low and medium Earth orbit, and is hitting the U.S. market with it.

Backing Iridium would have been complicated for Ex-Im given Iridium’s U.S. passport. But the company said at the time it could structure the project so that a European-based Iridium entity would be taking out the Ex-Im loan, allowing Lockheed Martin Space Systems of Sunnyvale, Calif., to build the satellites.

That appears to have been a watershed moment for Ex-Im.

With Space Systems/Loral of Palo Alto, Calif., and Orbital Sciences Corp. of Dulles, Va., regularly battling for global commercial work, and with Boeing Space and Intelligence Systems of El Segundo, Calif., refocusing on commercial satellites, Ex-Im raised its game.

In 2011, the bank financed $1.3 billion in satellite-export loans and guarantees. In 2012, it was $1.4 billion.

The most recent deal illustrates how far Ex-Im is willing to go. Earlier this year Ex-Im announced a confirmation of a late-2012 decision to approve a low-interest loan of $471 million to Asia Broadcast Satellite (ABS) of Hong Kong to cover the construction of two Boeing-built all-electric satellites, a new design, and one large satellite from Space Systems/Loral.

The financing also helped cover the launch of the Boeing-built satellites aboard Falcon 9 rockets built and operated by Space Exploration Technologies Corp. (SpaceX) of Hawthorne, Calif.

But the loan was made well after ABS had selected Space Systems/Loral to build the ABS-2 satellite, and well after construction had commenced. ABS-2 is scheduled for launch this year aboard a European Ariane 5 rocket.

In that sense, the loan — 8.5 years at a 2.5 percent rate including fees — was more of a thank-you note to ABS than a way to secure U.S. jobs.

ABS Chief Financial Officer Samuel Wong said the company had been negotiating with Ex-Im for a long time, which he said is one drawback of export-credit agency backing.

ABS secured bank financing for ABS-2 in advance of the Ex-Im commitment. Wong said the company’s bank lenders were more comfortable with their dealings with ABS given the presence of Ex-Im, even though the U.S. agency had not agreed to anything when the bank financing closed.

“I’m not saying the banks would not have lent to us without Ex-Im, but it certainly helped,” Wong said here March 18.

The Ex-Im package with ABS was part of a four-satellite contract with Boeing that also includes two spacecraft to be built for Satmex of Mexico, which will be launched aboard SpaceX Falcon 9’s with the ABS satellites.

John L. Schuster, vice president of Ex-Im and an expert on the satellite industry, said Ex-Im sharpened its satellite focus in response to Coface.

France and the United States have the world’s best-developed commercial satellite industries, and Coface had long been active in helping French prime contractors secure export orders. French and other European contractors, unlike U.S. satellite builders, cannot survive without a sizable commercial backlog.

Schuster said here March 18 that ABS “had done good work getting equity” for its expansion project, and its selection of the new Boeing all-electric satellite platform made the deal even more compelling.

“The fact that the electric platform is so cost competitive made [the project] a risk that the lenders were able to take,” Schuster said. “Normally this would be a classic equity risk, but they worked with us to make it an acceptable debt risk.”

Schuster said the bank thinks it can do still more in the commercial satellite arena to help U.S. builders pivot from military to commercial business.

 

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Article Comments

It is good news to see that the U.S. Ex-Im Bank is committed to the U.S. satellite industry. We found in our meetings, during Satellite 2013 last week, that many manufacturers of satellite-related equipment are unaware of Ex-Im's credit facilities; are hesitant to use them; don’t know how to use them; and/or are uncertain about how to smartly navigate the Bank process. Several CEOs and VPs said, "We don't use them [Ex-Im] enough and we really should because it helps us and our international clients do more business with us."

Since the commercial banks are making it more difficult to borrow funds, Ex-Im's role is becoming much more important as a deal enabler for U.S. equipment manufacturers, not just the satellite manufacturers, who make many of the leading technology solutions used by the global satellite industry.

Lastly, we are finding that the Bank is working hard to be flexible about how it interprets its charter to support U.S. industry in general, and we encourage companies to seek competent guidance so they can make the most of this resource.

Stephen G. Tom
Co-founder
Global Infrastructure Finance Advisors
Washington, DC
www.globalif.com

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