Wednesday, September 2, 2015

Dreamliners for Kenya Said to Be Stalled With Ex-Im Funding Gap

Two Boeing Co. 787 Dreamliners for Kenya Airways Ltd. are stranded outside a Seattle-area factory because the financing fell apart and the U.S. Export-Import Bank isn’t available to help bridge the gap, two people familiar with the matter said.

Boeing, Aviation Finance Co. and the African Export-Import Bank are still trying to work out financing with struggling Kenya Airways, said the people, who aren’t authorized to speak publicly.

The Dreamliners together list for about $450 million, a price that is typically subject to discounts.

The jets are the first Boeing aircraft to be left in limbo because of the shutdown of the Ex-Im Bank, a longtime source of funding for overseas sales, especially for buyers that find it hard to borrow commercially.

Ex-Im loan guarantees and other support have been unavailable since the bank’s charter lapsed in June amid congressional critics’ complaints that the agency amounts to “crony capitalism.”

“This definitely takes away one of the arrows in Boeing’s quiver when it comes to riskier credits,” said George Ferguson, senior analyst for air transport with Bloomberg Intelligence. Europe’s Airbus Group SE still has access to such financing, “so that gives them a competitive advantage.”

Urging Patience

Kenya Airways and Boeing declined to discuss details of the financing status of the two Dreamliners.

Boeing spokesman Doug Alder said the planemaker was “working closely” with the airline, while Kenya Airways Chief Executive Officer Mbuvi Ngunze said he would comment on the terms when they’re completed.

The Nairobi-based carrier is losing money, selling older aircraft and working with Afreximbank on a bailout. In adding 787s, it has a chance to cut operating costs because the jets -- Boeing’s most-advanced model -- feature lightweight composite construction that boosts fuel economy.

Built in Charleston, South Carolina, the 787s bound for Kenya Airways are now in temporary storage at Boeing’s main wide-body aircraft plant in Everett, Washington. They’re the last of nine 787-8’s ordered by the airline, and have been ready for delivery since midyear, according to Uresh Sheth, who has been tracking the handover delays in his All Things 787 blog.

Kenya Airways financed the first six of the planes through Ex-Im, which provided an $835.1 million authorization to the carrier last year, according to the bank’s website. Afreximbank, the African trade bank, has said it helped work on that transaction.

Lessor Exits

A seventh plane was financed in April by from Ireland-based AWAS Aviation Trading Ltd. and Aviation Finance. Since then, AWAS has dropped out, and Dublin-based Aviation Finance has stepped in to provide direct financing to the airline.

AWAS and Afreximbank didn’t respond to telephone messages or e-mails requesting comment.

“I can confirm we are working with Boeing, KQ and Afreximbank to find a better solution for Kenya,” Aviation Finance CEO Douglas Brennan said Wednesday in a telephone interview, using the airline’s two-letter code. Like Boeing and the airline, he declined to give details.

Boeing probably would find it easy to line up a new buyer for the planes because Dreamliner production slots are sold out through the end of the decade.

Closing the deal with Kenya Airways will be more difficult without Ex-Im support, Ferguson said. “You only really need Ex-Im financing when the public markets break down.”

(Felix Njini & Julie Johnsson - BloombergBusiness)

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