Alasdair Whyte

Archive for the ‘Aircraft export credit’ Category

Why the funding gap could arrive in 2010

In Aircraft export credit, Aircraft leasing, Aircraft loans, Airline finance on November 10, 2009 at 10:22 pm

This time last year consultants were busy forecasting that we could easily see 200 white tails or unsold new aircraft. Leading bankers warned of funding shortfalls of between $7 billion and $15 billion. And Airbus and Boeing were mocked for saying that there would be no funding gap.

As we get to the end of 2009 it is clear that the manufacturers were right. Toulouse and Seattle are not awash with parked aircraft (although a number of airlines have taken aircraft and parked them until next year) and airlines have managed to fund deliveries.

The main reason the funding gap did not arrive is because export credit agencies were able to step up so brilliantly.

Having predicted 2009 correctly the manufacturers now say we should not be worried about next year. Their main reasons to be optimistic are: export credit agencies are prepared to guarantee a similar amount of debt; the debt and equity capital markets are open; manufacturers have not stepped in to finance; and less cash is needed in 2010.

These are all true.

Whilst they are, understandably, getting a little tired, the export credit agencies are prepared to support another $20 billion in 2010. It looks like they will also be helping Chinese carriers out next year.

Airlines are not able to get PDPs or large syndicated loans, but carriers like TAM have shown that single-B credits can tap the unsecured bond market. US and European airlines have also been able to issue large amounts of equity. The debt may cost more than secured aircraft loans used to before Bear and Lehman but at least it is available.

Airbus and Boeing Capital have had a surprisingly quiet year but are ready to step up in 2010. Most significantly, manufacturers will deliver less aircraft next year including fewer expensive widebodies.

In 2009 airlines were expected to need $68 billion to finance deliveries. Next year the figure will be below $62 billion.

But – and this is an important but – it is too early to be confident. In fact a significant number of very senior and knowledgeable bankers are very worried about next year. They may have called the gap wrongly this year but could be right next year.

Although there are clear signs that banks are recovering is quite likely that we will see less lending. Many banks that have stopped lending stuck by commitments agreed in 2008 – and they deserve credit for doing this. While some banks hope to start lending again (like Lloyds) many others won’t close deals in 2010.

The biggest danger is that a single major carrier will become bankrupt.

Think Swissair. Many banks stopped lending straight away and moved out of the market. Committed aircraft finance banks reduced lending because staff were tied up restructuring deals. Most importantly, export credit agencies (which are all arguably understaffed in relation to the number of deals they close) had to spend many hours negotiating deals and placing aircraft.

So far in this downturn we have not seen a major default. The collapse of one big non-home country carrier could cause the funding gap to arrive faster than anyone is predicting.

It is terrifying to think that the whole market could be shut if just one major airline runs into trouble. Especially since this has happened in every aviation downturn.


Citi beats Emirates pricing with GOL bond

In Aircraft export credit on October 26, 2009 at 9:06 pm

Brazilian low-cost carrier  Gol has closed the second Ex-Im guaranteed aircraft bond at mid-swaps plus 50bp compared to Emirate’s mid-swaps plus 55bips.

The $60ish million deal finances two 737-700s. apparently almost 10 investors bought into the deal.

As investors are getting used to the asset class Citi did not even organize a virtual roadshow.  Pricing has nothing to do with the carrier or aircraft backing deal but bankers think spreads will come down further. Citi just closed a shipping bond at 45bps over mid-swaps.

ECGD bonds coming

In Aircraft export credit on October 16, 2009 at 2:05 pm

It looks like Goldman Sachs and Calyon are working with the UK’s Export Credit Guarantees Department (ECGD) to issue a aircraft bond similar to Emirate’s Ex-Im bond.
ECGD is the only European able to gurantee bonds.  So although this is good for Airbus customers (and Airbus) it won’t be able to issue anything like as much as Ex-Im bonds.

Emirates press release

In Aircraft export credit on October 8, 2009 at 2:33 pm

Emirates airline makes financing history

Emirates airline makes financing history – Secures US$413.7m aircraft financing in first-ever public bond offering backed by US Ex-Im guarantee – 8th October, 2009 – Dubai-based Emirates Airline announced today the successful pricing of its inaugural US bond offering guaranteed by the Export Import Bank of the United States (the “Ex-Im Bank”) related to a loan facility secured for three new Boeing 777-300ER aircraft. The transaction is in the amount of US$413.7m with a fixed rate coupon of 3.465% per annum. The secured notes are due 21 August 2021 and are payable in installments of principal and interest on a quarterly basis. Brian Jeffery, Senior Vice President, Corporate Treasury at Emirates, said: “This transaction is very important for the industry as it represents the first offering of its kind directly into the global public capital markets. We believe bond markets represent an important source of capital for the airline industry in general and for Emirates in particular. “Emirates is constantly in search of innovative structures and alternative sources of financing for our aircraft acquisition programme and this structure will go a long way in bridging the funding gap which is evidently present in these difficult market conditions. We are very pleased to be the first airline to complete this innovative product and we would like to pay special tribute to the long term vision of Ex-Im Bank and to the structuring and execution expertise of our arrangers Calyon and Goldman Sachs. This could not have come at a better time for the airline industry.” Goldman Sachs & Co. and Calyon Securities acted as joint bookrunners and joint structuring agents. Clifford Chance represented Emirates as issuer’s counsel and Milbank, Tweed, Hadley & McCloy LLP acted as underwriters’ counsel. Vedder Price PC acted as counsel for Ex-Im Bank. Emirates Airline operates over 1,000 flights per week from its base at Dubai International Airport. It flies to over 100 destinations in 61 countries across six continents, with 138 wide-bodied Airbus and Boeing aircraft and another 154 aircraft on order. The airline has financing in place for its aircraft deliveries up till summer 2010.

Emirates Ex-Im bond prices at 3.4%

In Aircraft export credit on October 7, 2009 at 11:02 am

Airfinance Journal has just revealed that the deal priced with 3.465% coupon. This is less than Libor plus 50bp.

Will add press release later.

This is great result for the airline, Goldman, Calyon, Ex-Im and Boeing.

Ex-Im bonds will give Boeing an advantage

In Aircraft export credit on October 4, 2009 at 6:46 am


Airbus and the European ECAs will nervously be watching the progress of Emirates’ Ex-Im bond – arguably the most significant aviation bond since ALPs in 1992.

While they will not want to admit it, they know they cannot compete. Coface and Hermes are not set up to guarantee bonds. The UK’s ECGD is happy to front deals (so guarantee 100% of certain deals) but: it won’t have the same capacity as Ex-Im; it will be more complicated to issue them bonds than for Ex-Im as US government entities have simpler regulations; and bonds will be more expensive as UK CDS trades outside the US.

Coface and Hermes need to change quickly. Next year we will start thinking of US Ex-Im as a cheap, liquid bond market while Airbus ECA looks like an old fashioned bank market. Whether this is true or not (and there is a lot to be said in support of the bank market) it will encourage airlines to order Boeing over Airbus.

While we are talking about export credit let’s scrap the home country rules. Aircraft parts are sourced from all over the world and the home country rules are increasingly outdated and still very unfair. European ECAs could do this tomorrow – the big problem would be for Ex-IM.

Sorry forgot Apple Bank, banks financing Export credit loans

In Aircraft export credit on September 29, 2009 at 11:32 am

Bob Morin, head of transportation at Ex-Im, pointed out that Apple Bank has closed Ex-Im loans is year. The Ex-Im league table is coming out next week. Etihad got 15 bids so will try and add missing three later

  1. Apple Bank
  2. Barclays
  3. BayernLB
  4. BNP Paribas
  5. Calyon
  6. Citi
  7. Credit Suisse
  8. Deutsche Bank
  9. JPMorgan
  10. Natixis Transport Finance
  11. SMBC
  12. Toronto Dominion (TD Securities)

Banks offering aircraft Ex-Im or export credit loans

In Aircraft export credit on September 20, 2009 at 8:43 pm

Three years ago, banks were moving out of this market and there were a handfull of lenders that thought export credit made sense.

The increased competition (and changes like the Ex-Im put option) have brought pricing down significantly. Airlines can now get Ex-Im debt at around Libor plus 60bpss, with European export credit between 60bps and 80bps.

The following banks are all bidding for deals:

  1. Barclays
  2. BayernLB
  3. BNP Paribas
  4. Calyon
  5. Citi
  6. Deutsche Bank
  7. JPMorgan
  8. Natixis Transport Finance
  9. SMBC
  10. Toronto Dominion (TD Securities)

I think I am missing a couple of German banks and will update. If any airline wants contacts at any banks on the list please ask and I am happy to email them.

Emirates Airlines set to issue first Ex-Im bond

In Aircraft export credit on September 9, 2009 at 9:38 pm

Emirates has always been an innovative airline, and if its next 777 delivers on time, it should this month (September 2009) launch the first ever aircraft bond guaranteed by the Export-Import Bank of the United States (Ex-Im). Calyon and Goldman Sachs are structuring it.

The two banks have also won an Ex-Im bond mandate from aircraft lessor AerCap.

I am in Dubai later this month so hope to get the full story.

PS: This is on the blog before the Airfinance Journal website as wordpress is much easier to log-in to

PPS: Although I have a big ego, as a journalist I have always been taught to avoid using the term “I”. Finding it hard not to use it on a more relaxed blog but will stop if you like!

Aircraft export credit back in fashion

In Aircraft export credit on September 5, 2009 at 9:29 pm

It is no surprise that staff at the main export credit agencies have never been so busy. The big shock is how many banks are now competing to lend on these deals and how quickly pricing has come in.

Three years ago it looked like the market was going to be completely dominated by four banks led by ABN Amro (whatever happened to them?!). Other banks without cheap funding (typically through conduits) could not compete.

Now everyone seems to be offering export credit. Earlier in the year US Ex-Im put down a marker when it funded loans for airlines after they were offered debt at over Libor + 150 bips. Now – just six months later – European deals are closer to 85bps and Ex-Im guaranteed debt is around Libor plus 50bps.

There is a race between Goldman/Calyon and Citi to be the first to issue Ex-Im guaranteed aircraft bonds – or EGABs.

One European bank is also working on an exciting solution for Airbus export credit deals which should be available in a few months (more to come).