Boeing Faces Credit Risk If Ex-Im Bank Closed, S&P Says

Boeing Co. (BA) may face a long-term credit risk if Congress doesn’t reauthorize the Export-Import Bank, said a report by Standard & Poor’s Ratings Services.

Without financing from the bank, the world’s largest plane maker may need to provide between $7 billion and $9 billion in financial backing to airlines and other clients, according to the report today. Chicago-based Boeing’s current financing portfolio was $3.5 billion on March 31.

A number of Republicans in Congress oppose reauthorizing the 80-year-old Export-Import Bank, which provides low-cost loans to aid U.S. exports. The lender says its loans supported more than 200,000 jobs last year at no cost to taxpayers.

Backers of the limited-government Tea Party criticize the loans as corporate welfare. Authorization for the bank expires Sept. 30.

“Boeing, the largest beneficiary of Ex-Im’s activities, could face long-term credit risks, especially if it responds by significantly expanding the direct loans and guarantees it provides to its airline customers in order to remain competitive,” according to S&P, a unit of McGraw-Hill Cos. that provides credit ratings and financial information.

Airbus Group (AIR), based in Blagnac, France, and Boeing’s main competitor, has financing support from European export credit agencies.

Shares Fall

Boeing fell 1.8 percent to $126.77 at 3:47 p.m. in New York. The decline is one of the steepest among the members of the Dow Jones Industrial Average. (INDU)

“The potential effects on multiple U.S. business sectors as noted in the S&P report are consistent with what we have been saying all along,” Boeing spokesman Tim Neale said in a statement. “For aerospace, the elimination of Ex-Im would put Boeing and thousands of companies in our U.S. supply chain at a competitive disadvantage to Airbus.”

The Ex-Im bank’s renewal came into question after Representative Kevin McCarthy, a California Republican elected to become House majority leader Aug. 1, said last month that lawmakers should let the bank expire.

Two Republican senators, Mark Kirk of Illinois and Roy Blunt of Missouri, said they’ll support a proposal from Democratic Senator Joe Manchin of West Virginia to keep the bank operating for five more years and increase the lending cap to $160 billion from $140 billion.

‘Doubly Concerned’

Kirk said the S&P report made him “doubly concerned” about the need to renew Ex-Im’s reauthorization.

“We should make sure the No. 1 exporter in America is solid,” Kirk said in an interview today in Washington.

Manchin’s plan, which hasn’t been introduced, would make it easier for the bank to finance exports for coal-fired power plants to some countries, including India.

The S&P report said eliminating Ex-Im wouldn’t pose an immediate credit risk for the U.S. exporters other than Boeing. The rating service said three other exporters -- General Electric Co. (GE), Caterpillar Inc. (CAT), and United Technologies Corp.-- represent some of the largest beneficiaries of Ex-Im’s loans and guarantees, though the amounts financed are generally less than 2 percent of their revenue.

To contact the reporter on this story: Michael C. Bender in Washington at mbender10@bloomberg.net

To contact the editors responsible for this story: Jodi Schneider at jschneider50@bloomberg.net Laurie Asseo

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