EXIM Bank offers financing support to foreign purchasers of new and used U.S.-manufactured commercial and general aviation aircraft, including helicopters, installed engines and spare engines, under its direct loan, guarantee, and insurance programs. The OECD Sector Understanding on Export Credits for Civil Aircraft (the "2011 ASU") governs the terms and conditions of EXIM Bank's support for aircraft.
The 2011 ASU applies to transactions with a repayment term of two years or more of the followings goods and services:
- new civil aircraft and engines installed thereon, including buyer furnished equipment;
- used, converted, and refurbished civil aircraft and engines installed thereon, including in each case, buyer furnished equipment;
- spare engines;
- spare parts for civil aircraft and engines;
- maintenance and service contracts for civil aircraft and engines;
- conversion, major modifications and refurbishment of civil aircraft; and
- engine kits.
The 2011 ASU does not apply to exports of military aircraft (and related equipment) or flight simulators. The 2011 ASU can be found here.
EXIM Bank lends, or 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 EXIM Bank's "Fact Sheet on Finance Lease Structure" for more detail (available on EXIM Bank's website).
The credit decision is based on the creditworthiness of the airline/lessee and/or the guarantor, if any, plus the additional security provided by the finance lease structure, a first priority mortgage on the financed aircraft, and any other risk mitigants.
As stipulated by the 2011 ASU, EXIM Bank can offer up to a maximum repayment term of twelve years. The EXIM 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 either a level principal ("straight-line") or a level principal and interest ("mortgage-style") basis.
The maximum amount of the EXIM Bank supported financing for a new 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 EXIM Bank financing may be reduced depending on the risk associated with the transaction.
EXIM Bank may allow the inclusion of spare parts, related ground equipment, training costs, and transaction expenses in sovereign guaranteed aircraft transactions. Generally, these items are not included in asset-backed 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 strong credit risk. Alternatively, the items could be financed under an EXIM Bank supported financing separate from the aircraft financing.
EXIM Bank will consider supporting the export from the United States of "used" aircraft on a case-by-case basis. EXIM Bank support for used aircraft is subject to the terms and conditions set forth in paragraphs 18 and 19 of Part 3 Used Aircraft, Spare Parts, Maintenance and Service Contracts of the 2011 ASU. In addition to the requirements of the 2011 ASU, EXIM Bank will also require a Used Equipment Questionnaire to be completed and submitted as part of the application.
As a general rule, EXIM 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 EXIM Bank's "Fact Sheet on Defense Articles and Services" for a summary of those exceptions (available on EXIM Bank's website). In addition, if the buyer of an aircraft is a police or security force, EXIM 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.
Minimum Premium Rates (Exposure Fee)
An exposure fee (risk premium) is charged for each transaction in accordance with Appendix II (Minimum Premium Rates) of the 2011 ASU. The exposure fee charged on a particular transaction reflects the creditworthiness of the borrower and/or guarantor and the terms of the financing. The risk premium may be included in the financed amount supported by EXIM Bank. The 2011 ASU Minimum Premium Rates are adjusted quarterly based on market data.
Commitment Fee and Other Fees
EXIM Bank will charge a commitment fee (and other fees) in accordance with Article 16 of the 2011 ASU. The fees vary depending on whether EXIM Bank is providing a guarantee or a direct loan. The commitment fee and other fees cannot be financed as part of the EXIM Bank financing.