U.S. Ex-Im Satellite Loans On Track To Hit $1.4 Billion

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PARIS — The U.S. Export-Import Bank is likely to finish 2012 having invested a record $1.4 billion in satellite projects on behalf of U.S. satellite and launch services providers, according to John Schuster, Ex-Im’s director of structured finance.

“This is a huge, huge growth” for the bank, which in the past couple of years has been as active as France’s Coface export-credit agency in financing satellite investments.

Schuster said the bank, whose mission “is to be good for our exporters,” also continues to be good for U.S. taxpayers as it returns between $500 million and $1 billion a year to the U.S. Treasury.

Answering critics who say Ex-Im, Coface and the other export-credit agencies are propping up satellite projects that have no solid business case, Schuster said Ex-Im has a requirement that the default rate on its loans not exceed 2 percent. It is now about one-half of 1 percent, he said.

“We have indeed invested a lot of money, but there have been no losses in the satellite sector,” Schuster said Sept. 12 during World Satellite Business Week, organized by Euroconsult.

Schuster said Ex-Im has constraints that may not apply to other export-credit agencies. For example, it cannot invest in military systems, and investments in dual-use projects face special examination. Similarly, Ex-Im combs through each satellite project to determine the exact portion of it that is going to U.S. business, and sets its loan based on that amount, he said.

“If a U.S. prime contractor’s bid has 40 percent foreign content among its subcontractors, we limit our loan to 60 percent, whereas others might go to 85 percent,” Schuster said.

Without mentioning specific projects, Schuster said Ex-Im’s due-diligence procedures were sharp enough in 2009 to uncover the orbital-slot-registration risks associated with a satellite project it was backing. Industry officials said he was referring to London-based Avanti’s Hylas 2 Ka-band satellite, built by Orbital Sciences Corp. of Dulles, Va.

Schuster said Ex-Im proceeded with the loan despite the open regulatory issues related to where Hylas 2 would operate after having found “a mitigant.” He declined to specify what it was.