Airlines and lessors eye hybrid capital markets for funding

This story is sourced from

Airlines and operating lessors are looking to raise money through hybrid capital markets issuances, possibly before the end of the year, sources indicate.

The debt structure has been popular with large utility companies in Europe, says a source, adding: "More issuances are popping up all time as companies look for ways to pay for capital-intensive practices."

This year the capital markets have attracted a wide-range of issuers with the most recent offerings from Virgin Australia with a $732 million enhanced equipment trust certificate (EETC) deal and Avolon Aerospace with a $632 million asset-backed securitisation .

According to Jefferies' fixed income research, United Continental had the highest balance of outstanding debt among EETC issuers through 28 March 2013.

Global airlines had $21.9 billion in outstanding EETC obligations, and non-North American-based airlines accounted for $735 million of that amount.

The Chicago-based carrier amassed $8.2 billion in outstanding EETC debt, based on 25 separate transactions issued between 1997 and 2012.

Delta Air Lines finished a distant second with a balance of $4.5 billion on the back of 13 transactions.

In January, General Electric Capital, parent company of GECAS, kick-started lessor financings in the capital markets, after a lull, with a fixed- and floating-rate notes offering totalling $1.7 billion, secured by 137 aircraft on lease to US airlines.

Goldman Sachs and Citigroup acted as joint bookrunning managers, while BNP Paribas and Crdit Agricole were the passive bookrunners. Goldman Sachs was the sole structuring agent.