Emirates raises $630m for aircraft lease deals

Dubai carrier raises funds through EETCs for purchase of four Airbus A380 aircraft

Dubai's flagship airline carrier Emirates last week raised $630m through the issuance of enhanced equipment trust certificates (EETC) to fund the purchase of four Airbus A380 aircraft.

EETCs are secured financing, and are used by airline carriers to buy aircraft, mainly in the United States. Typically they are issued through a special purpose vehicle which assumes ownership of the aircraft and leases them out to the airline carrier.

The lease payments received by the SPV are then channelled to bondholders through coupon payments.

After opening books on the dual-tranche deal on Wednesday, leads launched a $168m Class A tranche at 6.125 percent and a $462m Class B tranche at 5.25 percent the following day.

The difference in the coupon reflected the difference in seniority.

Both deals priced Thursday night at par, the smaller junior tranche having an expected tenor of 6.4 years and the larger senior one an expected tenor of 9.9 years.

The EETCs were issued through SPV DNA Alpha, and the aircraft when purchased will be held by the SPV and leased to Emirates until maturity, at which point Emirates will assume ownership of the planes.

Through the lifetime of the deal, the investors have recourse to the collateral - the aircraft in this case - and to the equity of DNA Alpha's parent.

The key point was the jurisdiction of the SPV in case Emirates does go bankrupt. In this case, DNA Alpha is governed by Cape Town law in an insolvency event. Cape Town law was chosen to reassure investors that it will be governed by international courts rather than UAE ones, especially as Emirates is state-owned.

The EETC investment community is a niche investor group in the US, since most deals happen there. They accounted for the bulk of the orders in this deal, though there was some demand from Europe as well.

The proceeds will be held in escrow and withdrawn when each of the four aircraft is bought.

Citigroup Inc, Goldman Sachs Group and Morgan Stanley were bookrunners while Credit Agricole was co-manager on the deal.

The first Emirates deal in June last year was expected to pave the way for other airlines issuers in EMEA to move to the US-style of funding the purchase of aircraft, especially as banks are becoming less active in providing loan financing.

This year, British Airways raised $928m through the issuance of EETCs, and Turkish Airlines is believed to be in talks with banks on a similar deal to raise $500m to fund its aircraft orders from 2014.

Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

NOTE: Comments posted on arabianbusiness.com may be printed in the magazine Arabian Business

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

All comments are subject to approval before appearing

Further reading

Features & Analysis
How Ramadan has earned prime spot on Gulf fashion calendar

How Ramadan has earned prime spot on Gulf fashion calendar

From Dolce & Gabbana to Michael Kors, major brands are catering...

Saudi Arabia's new heir leads revolution of powerful millennials

Saudi Arabia's new heir leads revolution of powerful millennials

Why the youngest crown prince in living memory represents a broader...

Three things to watch as Saudi Arabia names new heir to throne

Three things to watch as Saudi Arabia names new heir to throne

Yemen, the Saudi economy and the Qatar-Gulf crisis will be high...

Most Discussed