Exim Bank approves Garuda loan

Exim Bank approves Garuda loan

WASHINGTON (Dow Jones): The U.S. Export-Import Bank approved Thursday a long-term loan guarantee to back Boeing Co.'s (BA) $345 million export of 11 737 aircraft to state-owned airline Garuda Indonesia.

The Boeing aircraft will help Garuda provide critical links between Indonesia's widely scattered islands at a time when many of the country's domestic airlines have ceased or curtailed operations, according to a U.S. Exim Bank statement.

"We continue to look for ways to finance credit worthy transactions in Indonesia as the Indonesian government's economic reforms continue to move forward," said Exim Bank Chairman James A. Harmon.

The exports will take the form of an asset-based finance lease with the aircraft serving as collateral. To address credit risks, Indonesia's Finance Ministry will serve as lessee of the planes rather than the usual arrangement whereby the airline is the lessee.

The Finance Ministry will agree to allow and cooperate in repossession of the aircraft if it defaults.

The Finance Ministry and Garuda are in the process of choosing a lender to arrange the loan that U.S. Exim Bank will guarantee.

The six 737-300 and five 737-500 narrow-body aircraft provided will be fitted with engines made by CFM International Inc. of Cincinnati, Ohio.

CFM is a joint venture between France's SNECMA and General Electric Co. (GE)

U.S. Exim Bank is a government agency that assists export financing for U.S. goods and services. Its financing for Boeing's sale to Indonesia will take effect after a normal 30-day congressional review period.