Air Canada upsizes and prices 777 EETC deal

Washington DC
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Air Canada-owned Loxley Aviation has upsized its secured enhanced equipment trust certificate (EETC) issue to $714.5 million, the airline's first aircraft financing in the capital markets.

The Canadian flag carrier added a $108.3 million deeply subordinate C tranche to the $606 million two-tranche private placement during the afternoon on 24 April, after launching the deal that morning. The debt is secured by and finances the delivery of five Boeing 777-300ERs with deliveries from June to February 2014.

Air Canada is the second non-US issuer of EETCs, following Emirates' $587.5 million Doric Nimrod Air Two deal last year, in the market since the 2008 credit crunch. The Dubai-based carrier and British Airways-parent International Airlines Group (IAG) are understood to be working on similar deals.

The $424.4 million senior A tranche priced with a coupon of 4.125% with a final distribution of May 2025, the $181.9 million B subordinate B tranche carries a 5.375% coupon with a final distribution of May 2021, and the C tranche a 6.625% coupon with a bullet May 2018 maturity.

The 2013-1 issue has an initial loan-to-value ratio of 48.9% for the A tranche, 69.5% for the B and 82.3% for the C.

The A tranche is rated A, Baa3 and A- by Fitch Ratings, Moody's and Standard & Poor's, respectively, the B BB+, B1 and BB, and the C BB-, B3 and B.

Canada ratified the Cape Town treaty in April 2013, allowing Air Canada to issue the EETCs.

Natixis provided a liquidity facility for the A and B tranches, and is the depositary.