Aviation giant Boeing would be the biggest loser among American industrial giants from a move by congressional Republicans to close the US Export-Import Bank, a Standard & Poor's report said today.
Boeing would face "long-term credit risks" if Congress does not reauthorize the Ex-Im Bank, whose authority expires on September 30, the credit ratings agency said.
The 80-year-old Ex-Im Bank, targeted for the chopping block by some Republican leaders who say its functions would be better served by the private sector, provides loan guarantees and other types of financing to support exports.
Boeing is its single-largest beneficiary, getting public financing for the sale of aircraft to airline customers.
The elimination of the US agency could endanger Boeing's long-term credit risks and would put Boeing at a disadvantage to its main rival Airbus, which receives support from European export credit agencies, S&P said. The consequences would be especially dire in a downturn.
Airbus's continued ability to offer financing from export agencies "could be a deciding factor for some new aircraft contracts, especially in emerging markets and for sales to start-up or financially weak airlines," the report said.
To make the sales, Boeing might take on more debt itself, or "try to find another buyer for the aircraft, which could be difficult in a downturn, or it might forego the sale, which could result in lower revenues, earnings and cash flow. Any combination of these actions would likely result in weaker credit ratios."
The proportion of Ex-Im financing for new Boeing deliveries has ranged in recent years from 16% to 30%. The agency's elimination could add as much as $9 billion to Boeing's new financing needs if the company decides to fund all of the deliveries it had expected Ex-Im to finance, the report said.
Although other US industrial heavyweights such as Caterpillar, General Electric and United Technologies also benefit from Ex-Im financing, the proportion of Ex-Im financing for these companies overall constitutes less than 2% of revenues.
Dow component Boeing tumbled 1.6% to $127.06 in afternoon trade.
