Satellite Industry Faces Financing Struggles Without Ex-Im

Ex-Im financing is a staple of technology companies looking to get into the export market, with the space sector particularly dependent on its direct and guaranteed loans, said Joshua Hartman, managing partner at Renaissance Strategic Advisors, an aerospace and defense industry consulting firm. Ex-Im authority lapsed July 1, meaning it cannot take on any new business, and trying to eliminate the bank has become "a marquee issue" for some small-government lawmakers in the House who haven't let reauthorization come up for a vote, Hartman said. The bank has played a role in 60 percent of space satellite deals in recent years because credit markets are reluctant to invest in a complex industry, he said: "It's an important part of many business plan closures."

Between 2010 and 2014, Ex-Im backed $5 billion in satellite deals that represented as many as 7,000 jobs directly, said John Schuster, principal with 32 Advisors' International Trade & Project Finance practice and formerly head of the bank’s Structured Finance Division. There have been no satellite transactions authorized by the bank this year, and the result is "far fewer satellites being built and purchased" and foreign companies having a greater opening at U.S. businesses like OneWeb, he said. This summer, OneWeb announced it had hired France's Airbus to build hundreds of low earth orbit satellites and that France's Arianespace would handle 65 of the launches (see 1506250023). "These companies want to stay and employ Americans, but at the end of the day they will move jobs overseas" to get access to one of the dozens of other export credit agencies around the world, Schuster said. Many other nations with their own export finance agencies are undoubtedly looking at the U.S. and Ex-Im "with competitive glee," Trauberman said. General Electric said last week that it will be relocating roughly 500 U.S. jobs -- mostly related to energy projects -- to China, France and Hungary as part of a deal struck with the French export credit agency for a line of credit. Without Ex-Im being reauthorized, such announcements "will not be an uncommon occurrence," Trauberman said.

Ex-Im's shutdown is partially to blame for Boeing's layoffs of hundreds announced last month (see 1508280018), Trauberman said. He added that U.S. companies are finding they cannot even bid on some international requests for proposals because they explicitly require having the backing of an export financing agency. Ted McFarland, senior director-GEOComm, Orbital ATK, said the company lost a business deal in Azerbaijan this summer because of the loss of Ex-Im: "We got in the door and then we lost it."

Financing projects internally is often not an option, Trauberman said: "We're not a bank. There's a limit to what we can do on the finance side. [Money spent on financing] is money you don't put into R&D, you don't put into growth." The lack of an Ex-Im "will ripple back into civil space and national security space sectors," Trauberman said. Except for a couple of major space industry firms like Eutelsat and SES, no long-term financing is available at reasonable rates without Ex-Im participation, Schuster said. "The commercial sector is much more hesitant [to lend] than we ever thought."

Ex-Im could be reauthorized this month as a rider in the federal budget authorization, or in October as part of the transportation bill. But panelists all expressed pessimism at that occurring. "There's very little this Congress is passing or doing on anything," Schuster said.