US Ex-Im Bank has renewed its offer to reduce its exposure fee by one third on financings of US large commercial aircraft for buyers in countries that sign, ratify and implement the Cape Town Treaty. The treaty is an international agreement that will facilitate asset-based financing and leasing of large commercial aircraft.
US Ex-Im Bank’s offer enables eligible foreign buyers to receive an Ex-Im exposure fee of as low as 2%, a one third reduction of the current minimum 3% exposure fee on financings of large commercial aircraft. More favourable financing terms also apply to asset-based financings of spare engines to such buyers. Ex-Im Bank has extended the offer for approvals issued through fiscal year 2005, which will end on September 30, 2005.
The US signed the Cape Town Treaty in May 2003. The US Senate approved the treaty on July 22, 2004, and President George W Bush signed the implementing legislation on August 9, 2004. The US ratification process will be completed when the ratification documents are formally deposited in Rome, Italy, with the international organisation, Unidroit, which is the depositary of the Cape Town Treaty and related protocols.
“Ex-Im Bank is renewing our offer of a one-third reduction of our exposure fee because we are committed to encouraging other countries to adopt the Cape Town Treaty and the related aircraft protocol,” says Ex-Im Bank chairman Philip Merrill. “Ex-Im Bank strongly believes that the Cape Town Treaty will reduce certain risks associated with cross-border sales and leases of aircraft and aircraft engines.”
Merrill added that Ex-Im Bank believes the reduced risk “justifies a reduction in our exposure fee for airlines based in countries that ratify and implement the treaty. The treaty is intended to make greater amounts of financing available to airlines on more attractive terms. Less costly financing will enable airlines to upgrade their fleets, thereby supporting jobs in the aerospace industry.”
Ex-Im Bank will offer the one-third reduction of its exposure fee (in connection with approvals issued through September 30, 2005) to buyers in any foreign country that has signed, ratified and implemented the treaty and the related aircraft protocol (including certain optional provisions specified in letters sent by Ex-Im Bank to such buyers).
The Cape Town Treaty, which was concluded at an international diplomatic conference held in Cape Town, South Africa in November 2001, establishes a commercially oriented, comprehensive international legal framework to protect security and leasing interests in aircraft equipment. The treaty has been signed by 28 countries, of which four countries already have ratified the treaty. The treaty entered into force on April 1, 2004, and will become effective as applied to aircraft and aircraft engines once eight countries ratify the aircraft protocol. The United States is expected to complete its ratification process later this year.