The U.S. Export-Import Bank has not guaranteed a loan for more than $10 million in over 2 years. For The Boeing Co. (NYSE: BA) that has been something of a headache because the company doesn’t sell a commercial jet for anywhere near that price. But in an agreement announced last Friday, the U.S. manufacturer struck a deal with Italy’s SACE SpA to under which the Italian financial firm will guarantee up to $1.25 billion in loans to finance purchases of new Boeing airplanes.
In its announcement of the deal, SACE noted that Boeing purchased $2.5 billion in goods and services from 2015 to 2016 from Italian firms and supported 12,000 jobs in the country. Boeing has about 150 direct employees in Italy according to the announcement.
The Ex-Im’s charter was renewed in December 2016, but because no new appointments have been made to the bank’s board it can not authorize a loan or a guarantee valued at more than $10 million.The bank’s rules require a quorum of 60% of its nominal five members in order to make larger deals. The board now has just two members.
Some U.S. Senators have blocked new appointments to the board, arguing that the bank is no more than the “Bank of Boeing.” U.S. airlines, not eligible for Ex-Im financing guarantees, also argued against renewing the bank’s charter.
President Trump took office opposed to the Ex-Im bank, but after meeting with Boeing CEO Dennis Muilenburg reportedly changed his mind. That change has not yet filtered down to the Senate nor has it resulted in the President nominating new members to the bank’s board.
According to a report in The Wall Street Journal, SACE completed its first deal this month, providing guarantees of around $300 million for three Boeing 737-800s that have been sold to Turkey’s SunExpress. The planes have a list price of $98 million, but the actual price would likely have been 30% or so less than that.
Italian aerospace company Leonardo supplies about 14% of the parts, including the center and rear fuselage sections, for Boeing’s 787 Dreamliner at the company’s plant near Taranto.
This is Boeing’s first deal with a non-U.S. financial firm to help it finance aircraft purchases. One odd thing about the refusal to appoint new members to the Ex-Im bank’s board is that the bank turns a profit and makes or guarantees loans to hundreds of small U.S. firms.