Boeing Capital: Space and Defense Financial Services
boeing capital. i have heard this described by one writer as a “highly secretive” part of the boeing corporation. from boeings own website, the fully owned subsidiary sounds much like a lobbying or special interest group that works to secure government and private sector funding for aerospace and defense projects.
exactly how much capital and influence this group has, we have yet to determine.
While The Boeing Company has long been in the business of helping its space and defense customers arrange financing, Boeing Capital Corporation’s space and defense group was formed in 2000 to provide additional focus and expertise on arranging and structuring financing solutions for government and commercial customers around the world.
Vice President Bob Gordon and his group work closely with Boeing’s Integrated Defense Systems business unit to help arrange funding for satellites and launch vehicles, military transports, tankers and rotorcraft, and other advanced-technology products. Boeing believes the relatively new market for the commercial financing of space and defense projects is evolving and Boeing Capital is aggressively exploring the opportunities in these areas. As part of the world’s largest aerospace company, Boeing Capital’s customers benefit from the group’s expertise, structuring skills and experience, which are derived from Boeing’s rich history in space and defense.
Specialized projects and programs include:
- Military-related products
- International defense financing
- Private — Public Partnerships
- Project financing
- Launch vehicles
- Satellites and related space systems
With offices located in California and Missouri, Boeing Capital’s Space and Defense Financial Services group offers the advantages of the strength and global reach of The Boeing Company, along with seasoned professionals with broad expertise and innovative approaches.
Boeing Capital Corp. announced Thursday that it will move most of its operations currently located in Long Beach, Calif., to its headquarters in suburban Renton.
The financing subsidiary of Boeing Co. also announced it has retained Credit Suisse First Boston, LLC to explore options for its Commercial Financial Services group, including selling it outright, selling all or part of the commercial finance portfolio, or a phased “wind-down” of the existing portfolio.
Boeing Capital President Walt Skowronski said the move to Renton was aimed at cutting costs, increasing efficiency and improving productivity.
Boeing capital: a new source for funding: BCC has total assets of $8 billion, while its equity holdings have been held down to $1 billion. (Industry report: the re-making of Boeing).
Boeing Capital Corporation (BCC)was established as a new, wholly-owned business unit of the Boeing Company on 30 October 2000, under president James Palmer, who was already a senior VP and a member of Boeing’s Executive Council. Palmer was to report directly to chairman Phil Condit. Created at the same time and with the same status were Connexions by Boeing (the new service to provide high-speed Internet and entertainment services to airliners in flight), and Boeing Air Traffic Management.
At end-August, executives including Robert W. Gordon of BCC, who is president of its Space and Defense Financial Services sub-unit, came to Pads to give a special presentation on the occasion of Euroconsult’s “World Summit” on Financing for Communications and Broadcasting Satellites. Space and defence products are just one part (but an increasingly important part) of Boeing sales, which already account for about one-third of the company’s business, a proportion which looks likely to grow sharply. Other branches are Aircraft Financial Services, covering airliner financing — for both new and used aircraft, whether built by Boeing or others — and Commercial Financial Services, which caters for the commercial equipment markets (not restricted to those with any aviation connection) and also business aircraft.
Comparisons with the much better-known GE Capital are inevitable. According to Gordon, the latter has a greater proportion of its business in airliner financing (though it will retain a one-quarter interest of GE Americom’s satellite business following its sale to SES of Luxembourg later this year). Gordon also pointed out that BCC “obtained the most attractive 10-year funding of any corporate so far this year”, when it secured $750 million at par with a 6.1% coupon, rated A2/AA-. This bested Triple-A-rated GE Capital which had earlier priced a 10-year issue at 6.125%.
BCC has total assets of $8 billion, said Gordon, while its equity holdings have been held down to $1 billion. The shift in sources of financing has been even more dramatically illustrated when one compares the sources of satellite financing over the past two years. Sales of equity have dropped from $6.3 billion to $1.9B, issuance of public debt has dropped (to not quite so marked an extent) from $3.7B to $1.8B, while bank debt has climbed from $3.2B to $4.8B. Before a satellite is launched, remarked Gordon, “We obviously control it”. BCC is inclined to lend more on a simple Model 376 satellite than on a trail-blazing and highly innovative 702 design; not only is the asset that much bigger and more costly, but the degree of technical risk is that much greater.
Boeing got into the satellite financing business when it bought the former Hughes Space & Communications business last year. Previously the Hughes unit has relied on its then owner General Motors, which is still funding the Hughes Spaceway 10Gbit-capacity broadband, Ka-band system, to the tune of some $1.5 billion. The Spaceway satellites are now being built by Boeing Satellite Systems, but the system still belongs to its operator-to-be Hughes Network Systems, and thus has access to GM assets. But GM has reportedly put the whole of Hughes Electronics (which apart from HNS also includes DirecTV and 81% of PanAmSat) on the auction block, and is attracting competing offers from Rupert Murdoch’s planned Sky Global organization and from existing satellite operator EchoStar. So the future of Spaceway funding has to be regarded as uncertain, despite earlier statements that it was “fully funded” (to completion of a two-satellite, North-America-only service, that is).