Aircraft Exports

Ex-Im Bank offers financing support to foreign purchasers of new and used U.S. manufactured commercial and general aviation aircraft, including helicopters, under its direct loan, guarantee, and insurance programs. The OECD Sector Understanding on Export Credits for Civil Aircraft (the “OECD Aircraft Sector Understanding”) governs the terms and conditions of Ex-Im Bank’s financing support for aircraft.

New Large Commercial Aircraft

New “large” commercial aircraft (i.e., aircraft with 70 or more seats in a passenger configuration) are generally financed using an asset-based finance lease structure. Ex-Im Bank guarantees a loan extended by a financial institution to (i) a special purpose entity (which then leases the aircraft to the airline), or (ii) in certain exceptional circumstances, the airline. Please refer to Ex-Im Bank’s “Fact Sheet on Finance Lease Structure” for more detail (available on Ex-Im Bank’s website). Under an asset-based finance lease structure, the credit decision rests on the creditworthiness of the airline/lessee and/or the guarantor, if any, plus the additional security provided by the finance lease structure and a first priority mortgage on the financed aircraft. As stipulated by the OECD Aircraft Sector Understanding, Ex-Im Bank can offer up to a maximum repayment term of twelve-years. The Ex-Im Bank supported financing is required to amortize to zero over the repayment term of the financing in quarterly (or in special circumstances semi-annual) installments, on a “straight-line” or, in the case of a finance lease, a “mortgage-style” basis. In all cases, Ex-Im Bank reserves the right to make the final determination on the profile of the debt repayment schedule. The maximum amount of the Ex-Im Bank supported financing for a new large aircraft is up to 85 percent of the U.S. contract price net of all manufacturer and supplier credit memoranda (but not more than 100 percent of the “U.S. content” of the aircraft). However, the amount of the Ex-Im Bank financing may be reduced in cases where the risks are considered significant.

Ex-Im Bank may allow the inclusion of spare parts, related ground equipment, training costs, and transaction expenses in sovereign guaranteed large aircraft transactions. Generally, these items are not included in asset-based transactions. They may be considered, however, on a case-by-case basis when a substantial favorable loan-to-value ratio exists and the airline is a suitable credit risk. Alternatively, the items could be financed under an Ex-Im Bank supported financing separate from the large aircraft financing.

New Small Commercial and General Aviation Aircraft

Ex-Im Bank’s asset-based financing structure is used infrequently in Ex-Im Bank supported financings for “small” aircraft (i.e., aircraft with fewer than 70 seats). The credit decision on small aircraft transactions is based upon the creditworthiness of the airline and/or the guarantor, if any. In some circumstances, Ex-Im Bank may also require a first priority mortgage on the aircraft to secure the financing. OECD Category A aircraft (i.e., turbojet, turboprop, and turbo fan aircraft, with between 30 and 70 seats) may be financed on repayment terms of up to ten years. OECD Category B aircraft (i.e., turbine-powered aircraft with fewer than 30 seats) may be financed on repayment terms of up to seven years. OECD Category C aircraft (which includes all other aircraft) may be financed on repayment terms of up to five years. For all OECD Category A, B, and C aircraft, Ex-Im Bank may finance up to a maximum of 85 percent of the U.S. contract price, net of all manufacturer and supplier credit memoranda. Ex-Im Bank typically requires the financing to be repaid on a semi-annual basis in equal principal repayments.

Military Aircraft

As a general rule, Ex-Im Bank is prohibited by law from financing the export of military aircraft or the export of civilian aircraft to a foreign military unit. However, there are several limited exceptions to this general prohibition. Please refer to Ex-Im Bank’s “Fact Sheet on Defense Articles and Services” for a summary of those exceptions (available on Ex-Im Bank’s website). In addition, if the buyer of an aircraft is a police or security force, Ex-Im Bank will require a certification from the U.S. Department of State stating that there is no credible evidence of gross violations of human rights by the specific police or security force unit that will be using the aircraft.

Used Aircraft

Ex-Im Bank will consider supporting the export from the U.S. of both large and small “pre-owned” or “used” aircraft on a case-by-case basis. The terms and conditions will differ from those cited above for new aircraft. A Used Equipment Questionnaire must be completed and submitted as part of the application. The amount of the Ex-Im Bank supported financing will be based on (i) the net net invoice price of the used aircraft, (ii) an appropriate advance rate as determined by Ex-Im Bank, and (iii) an inspection and appraisal of the aircraft by an independent third party appraiser. In determining an appropriate advance rate and repayment term, Ex-Im Bank will consider several factors, including but not limited to, the loan-to-value ratio of the used aircraft, the potential resale market for the aircraft, and the results of the inspection and appraisal of the aircraft. It is possible that, based on the results of the inspection and appraisal and the estimated loan-to-value ratios, Ex-Im Bank might decide to finance less than the maximum amount of 85 percent of the cost of the used aircraft (or, if less, 100 percent of the “U.S. content”) and/or for a shorter repayment term than the maximum repayment term permitted under the OECD Aircraft Sector Understanding. As part of Ex-Im Bank’s financing support for the export of a used aircraft, Ex-Im Bank can finance up to 85 percent of the U.S.-sourced refurbishment and overhaul services. The table on the next pages sets forth the maximum repayment terms for used aircraft.

Fees

An exposure fee will be assessed for each transaction. The exposure fee charged on a particular transaction reflects Ex-Im Bank’s assessment of the creditworthiness of the borrower and/or guarantor and the risks presented by the transaction. The exposure fee may be included in the financed amount supported by Ex-Im Bank. Ex-Im Bank’s minimum exposure fee for an Ex-Im Bank guaranteed financing to support the export of a new large aircraft is 3 percent. Transactions that present particularly high risks may be assessed an exposure fee greater than the minimum.

On January 30, 2003, Ex-Im Bank’s Board of Directors approved a plan to reduce the exposure fee by one-third on financings of new U.S.-manufactured large commercial aircraft for buyers situated in foreign countries that sign, ratify and implement the Cape Town Convention, an international treaty that will facilitate asset-based financing and leasing of aircraft. Ex-Im Bank will offer the one-third reduction of its exposure fee in connection with approvals issued through September 30, 2004. Please refer to Ex-Im Bank’s press release dated January 30, 2003 (available on Ex-Im Bank’s website).

The Ex-Im Bank exposure fee for general aviation and/or used large commercial aircraft will be determined in accordance with the “Exposure Fee Calculator” located on Ex-Im Bank’s website.

In addition, Ex-Im Bank charges a commitment fee of one-eighth of one percent per annum on the non-utilized amount for a guaranteed loan (and one-half of one percent per annum for a direct loan), which begins to accrue 60 days after Ex-Im Bank approval of a transaction, and which may not be financed.